I have some important news to share with you regarding FHA financing.

There is a bill that was introduced by Chris Dodd (D) regarding many items with FHA financing.

It has already passed through the House and should pass through the Senate soon as well. Republicans tried to filibuster the bill but President Bush said he would not veto the bill so the chances of that happening are very slim.

Although there are some very good things in the bill there is one major item that will affect many new Homeowners. This bill will totally eliminate down payment assistance as of Sep 30 2008 Nehemiah, Ameridream, Preferred Program all of them. At this point we have to face the reality that those programs will be gone unless there is a miracle.

If you have clients that need down payment assistance they need to act fast. The new law will require that they come up with a minimum of 3.5% for down payment.

Here are the major components:

1. FHA Changes

Mortgage limits for high cost areas will be increased to $625,000 on a permanent basis (115% of the current conforming limit).

The FHA floor will go from 48% to 65% of the current conforming limit. This will put the new permanent floor at $271,000.

Cash down payment is set at 3.5%.

The seller funded down payment assistance program (DPA) will be terminated on September 30.

The risk based premium established by HUD last week will be suspended on September 30. The ceiling on upfront premiums will go to 3%.

2. Fannie and Freddie

The conforming loan limit will be increased to 115% of area median up to $625,000.

The bill provides for a federal "backstop" for Fannie and Freddie which allows the Treasury to capitalize the companies by taking an equity stake.

A new regulator with enhanced powers is created.

The bill creates an affordable housing trust fund paid for by assessments on Fannie and Freddie to help prevent foreclosures and facilitate affordable housing

3. FHA Rescue Fund

The bill creates a special FHA refinance program designed to allow the refinance into fixed rate FHA products of up to $300 billion in distressed mortgages.

4. Licensing

Encourages a nation wide licensing and registry system for loan originators by setting minimum qualifications and assigning responsibility to HUD for establishing new rules for those states that do not enact licensing laws.

5. Redevelopment of Foreclosed Properties

Provides $4 billion in funds for local governments to purchase and redevelop foreclosed properties.

6. Tax Incentives

Establishes a range of housing incentives, including a first time homebuyer tax credit and expands the Low Income Housing Tax Credit.

There is a great deal of detail in this complex bill and we will update you as more information is available