What Happened to the Stimulus?

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Construction workers on the site of an infrastructure project at the junction of Interstates 490 and 77 in Cleveland, Tuesday 30 June 2009. The project is being funded by government stimulus money as part of the American Recovery and Reinvestment Act. Greg Ruffing / Redux for TIME

When Congress passed the stimulus bill in February, it came as both good news and bad news to the Obama White House. The good: never before had an Administration had so much money to spend on voters in need — to rebuild public buildings, save jobs, weatherize homes and fund community health centers. The bad: rarely has the passage of a measure been accompanied by such skepticism about the government’s ability to spend the money wisely or well.

And ever since, public doubts about the stimulus have, if anything, deepened. The economy deteriorated faster than economists expected, with unemployment now predicted to exceed 10% next year, higher than the White House had projected in January. While that might under normal circumstances make any stimulus more popular, voters have been spooked by the enormous deficits Washington is running up as it tries to right the economy. In 2009 alone, the U.S. government will take on debt equal to about 13% of its economic output, and by 2016 the U.S. debt is projected to top 70% of GDP, twice the 2000 level. Poll after poll has shown a steady erosion of confidence in the stimulus measure; one survey found that 45% of voters believe it should be abandoned midstream.

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Foreclosure Prevention: New Program Shows Big Jump #realestate

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The government seems to finally be making progress in its efforts to stem the foreclosure crisis. Housing and Urban Development officials say that lenders extended loan modification offers to 40,000 borrowers who were struggling to pay their mortgage in the second week of June. That is nearly triple the weekly average of about 15,000 workouts loan servicers had extended in the prior 10 weeks since the government’s latest foreclosure prevention plan was announced.

“Foreclosures were becoming a self reinforcing problem for the housing market,” said HUD head Shawn Donovan, speaking at last week to journalists at the National Association of Real Estate Editors annual conference. “Already, we are seeing signs that the housing market is better off than when President Obama took office.” See the book: House of Cards: The Faces Behind Foreclosures.

Of all the problems related to the financial crisis, rising home foreclosures has been one of the most persistent and toughest to solve. One plan, Hope for Homeowners, which was launched by the government with much fanfare last fall, has helped just 51 borrowers get lower-cost loans. Another program, the Hope Now Alliance, which is a voluntary effort put forth by lenders, has reached over 4 million borrowers. But it is estimated that less than a quarter of those borrowers assisted in the lenders’ program ended up with more affordable loans. In fact, many of the borrowers “helped” by the Hope Now Alliance have actually seen their monthly fees to up, as lenders spread unpaid balances over future months, rather than forgiving part of what was owed.

In March, the government launched Making Home Affordable program. The plan’s biggest difference is that the government agrees to pay servicers a few thousand dollars per loan they modify, depending on when they make the offer and how successful it is. The longer the homeowner stays current on the loans, the more a loan servicer would receive. The government also pledged $10 billion to offset the losses that banks and mortgage investors might suffer because of the modifications.

At first the plan, like the ones before, seemed to get off to a slow start. But in the past few weeks, the government’s efforts seem to be attracting more and more lenders who are willing to lower monthly payments and make other modifications that will help troubled borrowers keep their houses.

Still, some consumer advocates say the government’s latest effort does not go far enough. Even if the 40,000 modifications—a—week pace is sustainable, that means the government’s plan will only reach just over 2 million troubled borrowers in the next year. That’s far fewer than the estimated 6 million American homeowners who are at risk of facing foreclosure in the next year or so. And those estimates of likely foreclosures have been rising recently.

“It’s too early to tell how many people the program will help,” says Ken Wade, the head of NeighborWorks, a national foreclosure mitigation counseling service. “Servicers are still not responding to troubled borrowers as fast as they should.”

By Stephen Gandel Monday, Jun. 22, 2009

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Not too late to obtain the $8,000 tax credit for first-time home buyers…

You’ve already filed your 2008 tax returns and maybe you’ve already received your refund. That means it’s too late to obtain the $8,000 tax credit for first-time home buyers enacted by President Obama‘s Stimulus Plan, right? Wrong. The great thing about this tax credit is that you can still get the cash this year, even if you’ve already filed your taxes for 2008 – and the money is yours to keep. You don’t ever have to pay it back, as long as you stay in the home for at least 36 months.

There’s a lot of confusion in the media surrounding this tax credit, but it’s actually pretty simple. Qualified first-time home buyers (anyone who hasn’t owned a home in the three years prior to the purchase) can receive a tax credit of 10% of the purchase price up to $8,000. All you have to do is purchase a primary home (that means a home you’ll actually live in, not an investment home) any time between Jan. 1, 2009 and Dec. 1, 2009. If you make a qualified purchase after April 15, or after having already filed your 2008 taxes, you and your tax professional can submit an amendment to your return and receive the credit on your 2008 taxes – you don’t have to wait until next April.

There are some income limitations and other factors involved, but give us a call or a tax professional and we’ll gladly review your financial situation and see if you qualify. With today’s combination of low interest rates and lower home prices, this tax credit gives you a second chance to benefit from the great opportunities in today’s real estate market.