WASHINGTON (2/17/09)--Credit unions should note several agricultural, Small Business Administration and mortgage lending-related provisions that could encourage lending and which could be signed into law today. Credit unions could benefit from an increase in mortgage lending stimulated by a tax break provided to first-time home buyers. Under the stimulus package, first-time homeowners can receive a refundable tax credit equal to 10% of a home’s value--up to $8,000--for purchases made until Dec. 1. The credit must be repaid if the home is sold within three years of purchase. A similar provision was included in last year’s Housing and Economic Recovery Act, H.R. 3221, which allowed homebuyers to receive a tax credit (which must be repaid) equal to 10%--up to $7,500--of a home’s value. The provision applied to homes purchased between April 8, 2008, and July 1, 2009. Credit unions also should note that Federal Housing Administration (FHA) reverse mortgage Home Equity Conversion Mortgage (HECM) loan limits will be raised to $625,000 from $417,000. HECM is available only through an FHA-approved lender and is the only reverse mortgage insured by the government. FHA, Fannie Mae and Freddie Mac loan limits will equal 2008 levels of 125% of median home prices up to $729,750. Credit unions engaged in Small Business Administration (SBA) 7(a) and 504 lending will benefit a provision in the package that would raise the percentage of a loan that the SBA can guarantee to 90% from 85%. Credit unions will benefit from the increase because the guaranteed portion of such loans does not count toward the member business lending cap of 12.25%. (See related story: Stimulus could widen MBL opportunities for CUs) Other SBA provisions in the package:
* Allow small businesses to refinance existing debts under the SBA’s 504 program; * Provide $30 million for the SBA’s microloan program, which provides loans and technical assistance for low-income entrepreneurs and laid-off workers starting their own business; and * Reduce to zero fees on SBA-backed loans.
Credit unions also could benefit from a provision in the stimulus package that provides $150 million for Rural Community Facilities Program business loans and grants through the U.S. Department of Agriculture Business and Industry Guaranteed Loan Program. The added $150 million means that $3.01 billion more for loans and grants is available. Of that amount, $2.99 billion is for guaranteed business and industry loans. All credit unions are eligible to participate in the program. Loans must be collateralized. The interest rate is 2% of the guaranteed amount of the loans--0.25% annually--and does not count against credit union member business lending loan limits of 12.25%. The guarantee limits are: 80% on loans up to $5 million, 70% on loans ranging from $5 million to $10 million, and 60% on loans more than $10 million.