With much of the non-government backed lending off the table for a while, the FHA has been steadily increasing its mortgage business. A great deal of this growth has undoubtedly been related to the tax credit, as indicated in a recent story about a 20 year old home buyer who got into a home with an FHA loan and will receive a positive net from the deal due to the tax credit. Now, in and of itself, this may not be a problem if she can afford the payments, but she also is reported to have taken this loan out at a very high debt ratio of 54%. There are some posting threads on various blogs of readers/citizens speaking out angrily against this young woman's choices. The young woman explained that she and her brother's philosophy and strong work ethic came from their father. Dad purchased a home for his family shortly after moving to the United States from El Salvador. Within a year-and-a-half he attained home ownership. In order to fix their home, buy a car, purchase TV's and nicer things for inside the home, their father explained to the Young Woman and her Brother that he was able to do all this because of the house.
It was estimated that more than 2.2 million households would take advantage of the tax credit to the tune of about $18 billion. At last count, more than 1.4 million had, with the tab over $10 billion. In the House of Representatives, Representative John Lewis has launched probes into fraud, as the speed of the process left it open to abuse before fraud filters were in place. More than 100,000 exams of transactions have been opened. A few problems they've found include:
- People owning other homes got the credit
- People who hadn't closed on a home got the credit
- Children, some as young as four years old had qualified
It's been a very effective stimulus, with more than 60% of those taking advantage having incomes less than $50,000. Among the fixes proposed in new legislation, a minimum age of 18 years old will be required, IRS checks into prior returns to verify eligibility, and requiring documentation that a home was actually purchased.