By: George Warren; Columnist

When, as a result of massive fraud in the home mortgage securitization business, the economy quickly collapsed in late 2007, the US Congress rode immediately to the rescue. Since the housing industry had led the collapse, plans were made to revive it. Please do not misunderstand me. I believe the original homebuyer credit was a good idea, if given only to those with the ability to repay a mortgage. But as they say, “The devil is in the details.” I shall try to show how Congress missed the details. Congress passed HR 3221, The Housing and Economic Recovery Act of 2008. To encourage first time single family homebuyers, the government would fund refundable income tax credits of up to $7,500, not to exceed 10 percent of home costs. The individual maximum income limit was capped at $75,000, or $150,000 for joint income. While this was a direct government check, it was really an interest-free loan to be repaid with your future returns at $500 per year for 15 years. The date of purchase had to be between April 9, 2008 and July 1, 2009.

My own grandson, age 22 and a student at Southern Tech who also works, with my advice and my co-signature on his loan, purchased his first home, a foreclosure. When the government legally offers you a one time interest free loan to buy something you really need, you would be a fool not to accept it. He rents rooms to two other students to help pay his mortgage. He will be paying the tax credit back for the next 15 years at $500 per year.

Then Congress decided to up the ante, without paying attention to the details. The Obama administration introduced as its first legislation HR-1, the American Recovery and Reinvestment Act of 2009. This time, the Homebuyer credit was raised to $8,000, and with no requirement to be repaid. It was still limited to 10 percent of home cost, with a maximum individual income of $75,000, or joint income of $150,000. The effective dates are January 1, 2009 to December 1, 2009. Naturally, it brought out a lot of people looking for a free ride.

Now Atlanta’s Congressman, John Lewis, has his Subcommittee on Oversight of the Ways and Means Committee, looking at the fraud which has erupted in order to claim a gift of $8,000 government money which has no repayment requirement.

Deputy IRS Secretary Linda Stiff reported IRS has already processed over 1.5 million claims worth about $10 billion in tax revenue. But the National Association of Realtors estimates perhaps only 350,000 of the 1.5 million made a purchase strictly because of the legislation.

However, the IRS did not require written proof of a home purchase to be included with the return.    

J. Russell George, Treasury Inspector General for Tax Administration added the following testimony: More than 19,000 people filed 2008 returns claiming credit for homes they had not yet purchased, amounting to about $152 million. Some 74,000 people who filed for the credit had prior returns indicating prior home ownership which made them ineligible; claims amounting to about $500 million dollars. 580 taxpayers under the age of 18 claimed another $4 million. One was only four years old. 3,200 taxpayers claiming credits amounting to another $20.8 million filed returns only with Taxpayer Identification numbers (TIN), not Social Security numbers (SSN).This is a clear indication they were illegal immigrants, which Congress had excluded from the law. Congress has the IRS accept tax returns from illegal immigrants because they want the money. It is like another ‘don’t ask, don’t tell’ policy.

Out of 1.5 million homebuyer credit claims, IRS has frozen 110,000 refunds (7 percent) pending civil or criminal examinations, identified 167 separate criminal schemes and commenced 115 criminal investigations. Evidently, a larger number of claimants are home free.

Please don’t say no one has ever warned you that your Federal government has run amuck. A government big enough to give you all you want is big enough to take everything you have.