Homebuyers would get an extra three months to complete their purchases and qualify for a generous tax credit under a bill overwhelmingly passed by the House on Tuesday.
Under current law, homebuyers who signed purchase agreements by April 30 have until Wednesday to close on the sale to qualify for tax credits of up to $8,000. The bill would give buyers until Sept. 30 to complete their purchases.
The extended deadline only applies to people who signed purchase agreements by April 30. The National Association of Realtors estimates that about 180,000 homebuyers who already signed purchase agreements are likely to miss the Wednesday deadline.
"We owe this to the people who have essentially followed the rules who are caught by a closing date," said Rep. Sander Levin, D-Mich., chairman of the House Ways and Means Committee.
The bill passed 409-5. It now goes to the Senate, where senators were working Tuesday evening on a bill that would extend the tax credit and extend unemployment benefits for workers who have been laid off for long stretches.
The Senate could vote on its bill as early as this week — if senators can round up 60 votes to overcome a filibuster.
The popular tax credit has helped to stabilize the nation's slumping housing market. Nearly 3 million taxpayers claimed the tax credit through May 22 — claiming more than $21 billion — according to the Treasury Department.
The Realtors group says the tax credit has generated 1 million new home sales that wouldn't have happened otherwise.
The bill would also make it easier for the Internal Revenue Service and state prison officials to share information about inmates in an effort to fight fraud. The Treasury Department's inspector general for tax administration reported last week that nearly 1,300 prison inmates had improperly received more than $9 million in homebuyer tax credits while they were locked up.
The report said the IRS did not have up-to-date information on inmates.
The tax credit for first-time homebuyers was part of President Barack Obama's economic recovery package enacted last year. In November, Congress extended the credit and expanded it to longtime owners who bought new homes. First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
The Realtors group has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month.
Delays with mortgage lending and appraisal companies have meant that home sales are taking far longer to complete this year.
"A lot of lenders weren't able to handle the influx of loans that came with the tax credit," said Lucien Salvant, a spokesman for the National Association of Realtors.
There have been particularly long delays for buyers of so-called short sales — ones in which banks agree to accept less than the total mortgage amount. In Las Vegas, for example, short sales made up nearly a third of all sales last month.
Many banks "just don't have the process to the point where they can do it in a reasonable amount of time," said Jack Woodcock, a real estate agent in Las Vegas. Extending the tax credit deadline, he said, would be a welcome relief to those borrowers, many of whom "made their decision based upon that tax credit."
Associated Press writer Alan Zibel contributed to this report.
Source: The Associated Press.