On Saturday the Senate passed the Housing Bill. This 700-page law brings a variety of new rules and provisions that will impact the housing industry in a variety of ways. The President is expected to sign the bill into law early this week. Here are some summary points that any real estate professional should be aware of:
*Elimination of Down Payment Assistance (effective Oct. 1, 2008): The bill will eliminate the use of seller-financed down payment assistance programs (DPA) in conjunction with FHA loans. This loophole which effectively allowed the seller to give a buyer a 3% down payment so they could buy a home with a FHA loan putting $0 down grew in popularity over the past 6 months with the collapse of 0% down mortgage options.
*First Time Home Buyer Tax Credit: The bill calls for a tax refund for first time home buyers worth up to 10% of the sales price not to exceed $7,500. However, according to the cnn.money.com artilce, “The refund…serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.”
*Support for Fannie Mae & Freddie Mac: For follower’s of this blog you may remember the posting I wrote back on July 15th. This article explained the concern over the two mortgage giants’ capital structure and what their failure could mean for the real estate market in the US (here is a link to that article).
This bill moves to address the worries over the two mortgage companies by allowing the Federal Government to support the stock price as well as share the risk on a portion of their loan portfolios.
*Permanent increase to “conforming” loan limits: The bill would permanently increase the loan limits for Fannie Mae & Freddie Mac to buy and securitize from $417,000 up to $625,500. However, these new loan limits will only impact high-cost areas and will have little to no impact on the Portland-Metro Area.
*Greater Regulation?: In exchange for the government’s support the bill will create greater oversight of Fannie Mae & Freddie Mac by Federal regulators.
*FHA down payment increase?: According to the cnn.money.com article the bill will also increase the minimum down-payment for FHA loans to 3.5% from the current level of 3.0%.
*FHA loans for struggling homeowners: The bill also allows the FHA to insure up to $300 billion in new mortgages to refinance existing loans for homeowners who are “trapped”. There are a variety of provisions that a homeowner and lender must agree to in order to qualify for one of these mortgages. For a complete summary of the provisions of this section of the bill check this article.