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The short-term loan for the first-timer tax credit program…

We want our $8,000 first-timer tax credit at closing! And we aren’t gonna wait!

“Okay”says HUD Assistant Secretary Montgomery in the “Mortgagee Letter 2009-15″ that is dated May 11th.

Of course you can’t take out the whole $8,000 at closing since there are fees and expenses that need to be paid, and the $8,000 hard limit can’t be exceeded. So watch your step first-timers and don’t lose your whole credit to outrageous fees.

Could this be another ticking time-bomb for potential fraud and consumer abuse? Setting up an unwitting newbie for an IRS tax penalty?  Tread carefully with your mortgage lender.

The memo uses terms like “short-term credit advance loan” and “bridge loan” seem like family members of the “pay-day loan” and we all know how hit-or-miss that industry turned out. And the “Instant Refund” loans ran into a few problems with the California Attorney General.

Better yet, there aren’t any set interest rates or fees in the memorandum. So it is up to the market to figure out what “fees and charges” are not to exceed a nominal amount necessary really means. Even the biggest lenders haven’t digested this one yet and I plan on keeping tabs on the subject.

Okay America, you demanded your money right now and permission has been granted… just don’t let your nice credit get eaten up in fees or get you in trouble with the IRS.