Senate Will Agree to Extend Homebuyer Tax Credit: Sources

[Update 1: As of 4:10 EST, sources for HousingWire claim the Senate will extend the tax credit until April 2010. The credit will remain at $8,000 for first-time homebuyers with a separate $6,500 credit for second home purchases.]

Senate Democrats are close to compromising on a provision that would extend the first-time homebuyer tax credit.

Legislation creating the extension could be included in a bill that will extend unemployment benefits and could go to debate as early as this week, according to numerous media reports.

What remains to be seen is the terms of the extension. Some reports indicate the extension would run through June 2010 and expanded to include all homebuyers, not just first-time purchasers.

Another option would extend the full credit to first-time buyers until April 1, with $2,000 reductions every quarter until it dissolved at the end of 2010.

The National Association of Realtors (NAR) and National Association of Home Builders (NAHB), along with the Mortgage Bankers Association (MBA) continue to lobby federal officials to extend the credit.

According to the latest Department of Housing and Urban Development (HUD) and Census Bureau data, the rate of new home sales declined 3.6% in September. Some have speculated the impending expiration of the credit is contributing to the decline.

The American Credit Union Mortgage Association (ACUMA), a trade group that promotes credit union mortgage lending, also jumped on the tax credit extension bandwagon. In a letter to the chair of the National Credit Union Administration — the credit union industry’s equivalent of the Federal Deposit Insurance Corp. (FDIC) — and other Washington leaders, ACUMA representatives called for the extension and expansion of the credit.

Amid the discussion on the credit’s extension, last week a Treasury watchdog told to House Ways and Means Oversight subcommittee the Internal Revenue Service (IRS) may have improperly paid out millions in fraudulent homebuyer tax credit claims, including credits paid to minors and people who had not yet purchased homes.

Write to Austin Kilgore.