Housing Stimulus Bill Brings Foreclosure Relief to by Tony Sherman, ABR
Cassie Sherman, ABR
and Greg Scott Neuman, New Homes Realty Staff Writer On Wednesday, July 30th President Bush signed HR 3221 - commonly known as the Housing Stimulus Bill - into law. The President had earlier threatened to veto the legislation due to a provision containing $3.9 billion in neighborhood grants; the White House fears the money could benefit lenders who helped cause the mortgage crisis in the first place, and encourage them to foreclose rather than work with borrowers. That veto threat was withdrawn last week when both the House and Senate passed the bill, with the President noting that struggling homeowners could not wait for lawmakers to revise the plan yet again.
The provision that most directly affects homeowners facing foreclosure is the development of a refinance program for those with problematic subprime loans. Lenders will be allowed to write down qualified mortgages to 85% of the current appraised value, and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of the appraised value. In order to qualify for the program, borrowers must prove that they will be able to pay the refinanced mortgage and will have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide and it goes into effect on October 1, 2008.
Other parts of the bill offer benefits to particular homeowners, homebuyers, or segments of the housing industry. As summarized by the National Association of Realtors (NAR), these include:
· GSE Reform - including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
· FHA Reform - including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The downpayment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
· Homebuyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan). Click here for more info: Tax Credit Details
· Seller-funded downpayment assistance programs - codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008. · VA loan limits - temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.
· Risk-based pricing - puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.
· GSE Stabilization - includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.
· Mortgage Revenue Bond Authority - authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.
· National Affordable Housing Trust Fund - Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.
· CDBG Funding - Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.
· LIHTC - Modernizes the Low Income Housing Tax Credit program to make it more efficient.
· Loan Originator Requirements - Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.
Whether you're a first-time home buyer or an industry-savvy investor, consulting us, Tony and Cassie Sherman, can help immensely when trying to understand how laws like the Housing Stimulus Bill affect you. As buyer's agents, we stay informed about all the latest home buying incentives, loan programs, and special opportunities offered to qualified buyers. Perhaps most importantly, we are experienced industry professionals who know the Phoenix-area markets. No one is better prepared to help you find the perfect home in the perfect community, and at just the right price. Let us help you take full advantage of the Housing Stimulus Bill and our current buyer's market; an exceptional and affordable home buying experience is waiting for you!
