Foreclosure robo-signers put homebuyers' tax credit at risk
Homebuyers who were set to close on the purchase of a foreclosed home may not qualify now for the homebuyer tax credit after lenders suspended those sales in 23 states, real estate agents tell HousingWire. The closing deadline for the homebuyer tax credit was extended earlier in the year from July 30 to Sept. 30 in order to make sure more first-time buyers received the $8,000 credit. Existing homeowners were set to get $6,500. But on Sept. 20, Ally Financial, formerly known as GMAC Mortgage, announced a suspension of foreclosure sales in order to review affidavits that were signed without a knowledge of the documents or a notary present, otherwise known as robo-signing. HousingWire reported JPMorgan Chase made similar suspensions Sept. 29. "There are brokers who were at the closing table, with their buyers, and GMAC (Ally) pulled the carpet out from underneath them. Can you imagine the lawsuits they are going to have, for the people expecting the tax credit, which had to transfer title by Sept. 30?" one REO broker told HousingWire. The Internal Revenue Service has paid out $23.5 billion through homebuyer tax credits, which had supported the origination market to the point that home sales plummeted to a decade-low in July. The Government Accountability Office estimates that with all of the first-time homebuyer tax credits, the total revenue loss to the federal government will be about $22 billion. JPMorgan and IRS said they were looking into issue. Ally couldn't be reached for comment. Write to Jon Prior.