As many as 17 million people would be able to buy their first homes over the next seven years under novel tax credit legislation introduced this week in the Senate.

Under the measure, married taxpayers who are rookie buyers would be eligible for a one- time $6,000 tax credit ($3,000 for individuals) if they were in the 27 percent tax bracket or less in the year before they purchase their first homes.

Rookie buyers could claim the credit on their tax returns in the year after they make their purchase, or they could use the money immediately to cover some, if not all, of their up-front fees.

"What is particularly innovative about our proposal is the fact that the home buyer can transfer a tax credit to a lender at closing, as part of their down payment or closing costs," said Sen. Debbie Stabenow, D-MI, who co-authored the bill with Sen. Gordon Smith, R-Ore.

Stabenow, a member of the Senate Banking Committee, pointed out that one of the greatest barriers to home ownership for working families is the cost of a down payment and the charges associated with closing a mortgage.

The Mortgage Bankers Association estimates that closing costs on an average sized loan of $175,000 can quickly approach approximately $4,000. And even with the latest loan products that allow for as little as a 3 percent downpayment, the total cash requirement at settlement can quickly approach $9,000.

This is a difficult amount to save for many families who are trying to make ends meet, the Michigan Democrat said.

The income eligibility cap translates into a $67,700 ceiling for single filers, $96,700 for heads of household and $112,850 for joint returns. But there is a dollar-for-dollar phase-out of the tax credit beyond the limit.

MBA Chairman John Courson, a mortgage banker from Northern California, praised the unusual concept because, unlike other tax credit ideas, it gives potential purchasers the option of using the savings up-front when they need it most.

Normally, tax benefits associated with housing are an after-the-fact benefit that do little to help people actually purchase a house. For example, the ability to write-off mortgage interest is considered a powerful home-buying incentive, but it is only available to those who can otherwise afford to buy.

What is particularly innovative and beneficial about Sen. Stabenow and Smith's tax credit bill is that the taxpayer can either claim the credit in the year after he or she buys a first home or the taxpayer can transfer the credit directly to a lender at closing. Lenders would turn the credit into the government for reimbursement.

"The transferred credit would go toward helping with the down payment or closing costs," the two sponsors said in a statement.

In the House, meanwhile, Rep. Peter Visclosky, D-Ind., has signed on as the 200th cosponsor of National Housing Trust Fund legislation that would establish a dedicated federal revenue source to provide communities with money to build, rehabilitate and preserve 1.5 million units of housing over the next 10 years.

The initial source of funding would be profits generated by the Federal Housing Administration's Mutual Mortgage Insurance program, which is projected to have a $34.12 billion surplus between now and fiscal 2009.

Supporters of the proposal say it would address the gap between the cost of modest rental housing and what people with low wages can afford, while at the same time providing communities with real economic stimulus.

The measure's 200 co-sponsors are a politically and geographically diverse cross-section of the country, representing rural, urban, and suburban districts from 39 states, plus the District of Columbia and four territories.

The group includes 188 Democrats, 11 Republicans, and one Independent. Lead sponsors are Reps. Bernard Sanders, I-Vt., Robert Simmons, R-Conn., and Barbara Lee, D-Calif.

"More and more Members of Congress are recognizing the broad-based support for this bill and are responding to constituent demands for an increased federal investment in affordable housing," said Sheila Crowley, President of the National Low Income Housing Coalition.

"The lack of affordable housing is a national crisis that Congress can no longer ignore," she said.

The Coalition is spearheading a group of 4,000-plus organizations, local governments, elected officials and religious leaders which have endorsed the National Housing Trust Fund.

Published: June 5, 2003

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.