Senate Proposes Homebuyer Tax Credit to Rise to $15,000

Recently I have been blogging about the  newly formed Business Roundtable, a group of more than 100 chief executive officers of Fortune 500 companies working with the Administration to create solutions for the economic downturn we are currently facing.  What I want to drive home is that the actions of the Roundtable in Washington are beginning to have an impact on policies from which we will derive benefit here on the Westside. Due in large part to the Roundtable’s efforts, lawmakers are currently pushing to revive legislation in the Senate that would raise the $8,000 tax credit for first-time homebuyers to $15,000 and expand the program to all borrowers.

Leading the way is Senator Johnny Isakson, a Georgia Republican, who introduced a bill today that would increase the tax credit to $15,000 and remove income and other restrictions on who can qualify for the benefit.

The legislation, co-sponsored by Senate Banking Committee ChairmanChristopher Dodd, a Connecticut Democrat, would extend the homebuyer credit to multifamily properties used as the borrower’s primary residence. It would also eliminate income caps of $75,000 and $150,000 on individuals and couples seeking to claim the credit.

The bill is co-sponsored by Republican Senators Lamar Alexander of Tennessee,Saxby Chambliss of Georgia, David Vitter of Louisiana, James Risch of Idaho,Lisa Murkowski of Alaska, John Ensign of Nevada and Jim Bunning of Kentucky, according to a statement from Isakson.

 “The housing market continues to be a drag on the economy, John Castellani, president of the Washington-based Business Roundtable, said in a recent press release. “We believe that if we don’t stabilize this vital sector, we can’t turn the tide on the recession.”

The Business Roundtable represents more than 100 chief executive officers including General Electric Co.’s Jeffrey Immelt and Exxon Mobil Corp.’s Rex Tillerson. The Roundtable, along with the National Association of Realtors, are pushing to expand the tax credit and to lower mortgage rates to revive the housing market.

For All Borrowers

“One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can,” Isakson said in a statement. Isakson said his legislation would spur demand in the housing market by giving homeowners the incentive to trade up to a more expensive home.

The bill would extend the tax credit, which now applies to homes purchased from Jan. 1 to Dec. 1, 2009, to one year after the new measure is signed into law, according to Watson. Isakson’s bill would make the credit available to all borrowers, not only borrowers who haven’t owned a home in the previous three years as is the case under current law. It would also let borrowers divide the credit over two years. The legislation wouldn’t be applied retroactively to purchases completed before the date of enactment, Watson said.

Mortgage Rates

The Business Roundtable and Realtors group also recommended the Federal Reserve continue to purchase mortgage securities guaranteed by Fannie Mae, Freddie Mac and government mortgage bond insurer Ginnie Mae to drive down mortgage rates to less than 5 percent.

The Fed is about a third of the way through its $1.25 trillion commitment, holding $427.6 billion of mortgage debt backed by the government-sponsored enterprises as of June 3, according to the New York Federal Reserve.

The average rate on a 30-year fixed-rate U.S. mortgage jumped last week to the highest level since November, rising to 5.57 percent from 5.25 percent the prior week, according to data released today by the Mortgage Bankers Association.

The Treasury Department declined to comment on the Senate’s proposal.