Housing and Economic Recovery Act of 2008

H.R. 3221, is perhaps the most significant piece of Housing-related legislation we have seen in recent years. Helping stabilize the Housing Market and making the dream of Homeownership more attainable for many Americans. This bill is several hundred pages long, and there have already been hundreds of articles, summaries, and analyses of the Bill from the Media, many with conflicting and inconsistent data.

Here are some of the provisions the Bill includes:

• A permanent increase in "Conforming Loan Limits". The Law will permanently increase the cap on the size of Loans guaranteed by Fannie and Freddie 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 (12/31/2008). View 2009 FHA and GSE loan limit estimates
• Prohibits the Maximum Principal Loan obligation from exceeding 100% of the Appraised Value of the Property.
• A Ban on Down-Payment Assistance from Sellers. The new law eliminates a program that has allowed Sellers to provide Down Payment assistance for FHA loans. This prohibition does not go into effect until 10/1/2008. Some types of seller-paid down payment assistance programs are being eliminated as of October 1st as well - so purchasing a home before then may gain you a double benefit of tax credits AND seller-paid down payment assistance while it is still available. More about the seller-funded Down Payment assistance provision
  Tips to finding Down Payment assistance programs
• The Down Payment requirement on FHA Loans Increases from 3% to 3.5% of the Appraised Value of a Property the Lender’s required cash (or equivalent) investment (Down Payment).
• A New Home-Buyer Credit -The New Law Includes a Tax Refund for First-Time Home Buyers worth up to 10% of a Home's Purchase Price but no more than $7,500. Homebuyer Tax Credit is a $7500 Tax Credit that would be would be available for any qualified purchase between 4/9/2008 and 6/30/2009. The Tax Credit however, serves more as an Interest-Free Loan, since it would have to be paid back over 15 years in equal installments.
  First-time homebuyer tax credit chart
  Frequently asked questions about the first-time homebuyer tax credit
• Increases maximum Mortgage Insurance premiums for certain small family dwellings that are an obligation of the Mutual Mortgage Insurance Fund (MMIF).
• Revises requirements for Single-Family Mortgage Insurance on Hawaiian Home lands and on Indian reservations to replace the GIF with the MMIF as the obligated Fund.
• Authorizes the Secretary to insure a Home Equity conversion Loan that will be used to purchase a One- to Four-family Dwelling Unit, One unit of which the Borrower will occupy as a Primary Residence, and to provide for any future payments to the mortgagor, based upon available equity.
• FHA Hope for Homeowners -This provision is designed to help Homeowners who are "Upside Down" on their Loans--that is, they owe more on their House than they can sell it for in today's market. Essentially, this plan allows Homeowners who meet the requirements and are upside down to Refinance their Loan to a new 30-year Fixed FHA Loan.
• FHA Foreclosure Rescue –development of a Refinance program for Homebuyers with problematic Subprime Loans. Lenders would write down qualified Loans to 85% of the current Appraised Value and qualified Borrowers would get a new FHA 30-year fixed Loan at 90% of Appraised Value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on 10/1/2008. FHA Foreclosure Rescue Chart

If you have any questions or concerns regarding the new legislation and how it may impact you, please call or email to schedule a time to talk. Reply To: roger@homeloanconsultant.net