Clock ticking on crisis aid programs

When the Obama Administration announced the Making Home Affordable program in February, it estimated that the refinancing part of the program, known as HARP, could help as many as four million to five million homeowners with little or no equity (and even up to 5% underwater) refinance into less costly loans. So far it hasn’t exactly played out to expectations. Through July just 60,000 or so homeowners have landed a refi through HARP.

That makes it unlikely that HARP will come anywhere close to delivering on the administration’s goal by the time the program’s current authorization runs out in June 2010. (Its sister program, Home Affordable Modification Program, or HAMP, is authorized through 2012.)

While Treasury has the power to extend HARP past next year's deadline -- which won't really help unless Treasury can also arm-twist lenders into doing these deals -- a handful of other crisis-induced rule changes will need Congressional action to be extended beyond this year.

• $8,000 First-Time Home Buyer Tax Credit. You must close on the new home by December 1, 2009 to qualify for the maximum $8,000 credit. There are indeed bills floating around to extend the credit into 2010 -- and even raise it to $15,000 for all home buyers -- but so far no action.

• Required Minimum Distribution Waiver. Retirees caught a break in 2009: The rule that mandates taking an annual RMD starting by April 1 of the year after you turn 70 ½ was waived for 2009. (Is it just me or is that mouthful all the proof you need that our tax code is insanely obtuse?) This bone was offered so retirees who didn’t need the income would not be forced to liquidate battered 401(k)s and IRAs if they didn’t want to. (What really would have helped is if Congress had made the law effective for 2008, which is when retirees got totally whacked, as their 2008 RMD was based on their account value on December 31 2007 — before the bear market started. But I digress.) The current waiver expires at the end of ’09. A proposed house bill would extend the waiver through 2012; a Senate bill would keep the waiver through 2010.

• Double-Rebalancing of 529 Allocations. Until the financial crisis and bear market took hold in 2008 no one really noticed an odd IRS quirk that says owners of 529 College Savings Plans can only rebalance their portfolios once a year. Then when all financial hell broke loose, and families that had rebalanced early in the year weren't allowed to do some shifting around later in the year. So for 2009 the rule was stretched to allow two switches. Yep, there’s a bill floating around that will extend the two-times-a-year rule past 2009.

But the odds that any of these bills will get much attention before year-end seems dicey. Health care debate/legislation seems to be sucking all the oxygen out of Congress. As Jackie Williams of the New America Foundation told the trade magazine
Investment News
, "Everybody is so focused on health care legislation that everything else has to wait."