During the boom years, origination relied on a private investor base on the backend. As the bust took grip, the American taxpayer provided a light at the end of the tunnel. Concerns aside, this contribution likely prevented a short-term shutdown in origination. The first-time homebuyer tax credit, the low interest rates fueled by the Treasury mortgage-backed securitization (MBS) purchase program and a surge in Federal Housing Administration (FHA) lending are keeping mortgage originators busy this year. Without the taxpayer-financed government incentives in the housing market, many industry experts believe prices would have continued their downward spiral, market instability would be rampant and mortgage financing would be non-existent. “The American taxpayer is the savior of the credit and housing markets,” Zillow.com chief economist Stan Humphries told HousingWire. “Government programs have had a very important effect in 2009, in terms of the key reasons behind the stabilization of home prices that we’ve seen this year.” Congress enacted the first incarnation of the homebuyer tax credit as part of the Housing and Economic Recovery Act of 2008 (HERA). The refundable credit was worth 10 percent, capped at $7,500, of the price of a principal residence purchased between April 9, 2008, and July 1, 2009. The credit was essentially a tax-free loan. New homeowners who took the credit repaid it in 15 annual installments as an income tax surcharge. A year later, with the passage of the American Recovery and Reinvestment Act of 2009 (ARRA), Congress increased the maximum credit to $8,000 for homes purchased between Jan. 1, 2009, and Nov. 30, 2009. In addition, Congress repealed the tax credit’s repayment feature, so long as the homebuyer doesn’t sell the house within three years. “The first-time homebuyer tax credit has been a key short-term factor in why we’ve seen such a robust home shopping season in 2009,” Humphries said. According to the National Association of Realtors (NAR), the country’s largest trade association of real estate agents, nearly 1.5 million first-time homebuyers purchased existing homes in the first nine months of 2009. NAR believes that by the end of the year, a total of 2 million first-time homebuyers will have taken advantage of the $8,000 tax credit. Of those purchases, NAR spokesman Walter Molony said about 350,000 sales would not have happened without the tax credit. If NAR’s estimates are right, the federal government and, in turn, the American taxpayer will pay out as much as $16 billion in first-time homebuyer tax credit money in 2009 alone. TO READ THE FULL STORY, SUBSCRIBE NOW.