Just when buying a house couldn't be any more challenging today, Congress and President Bush railroaded the FHA buyer with a last minute addition to HR 3221aka, - The Housing and Economic Recovery Act of 2008 - aka, The Foreclosure Prevention Act of 2008 - aka, The New Direction for Energy Independence, National Security, and Consumer Protection Act - aka, The Renewable Energy and Energy Conservation Tax Act of 2007 - and... aka, The American Housing Rescue and Foreclosure Prevention Act of 2008.
First, and before I launch into my tirade about Section 2113 of HR 3221, I want you to take just a moment to reflect on what the much ballyhooed, Foreclosure Prevention Act of 2008 really dealt with. This BILL had so many heads growing out of it, that it began to look like the mythical hydra. This is a typical "Washington Maneuver" when creating legislation and/or laws. Our legislators just can't seem to focus on simply one single item. No... they have to tie one idea to another and then to another and to another and so on and so on. Soon enough, the idea that spawned the initial BILL, is loaded with all types of other issues and subjects that simply don't tie together, yet are lobbied for by each of their respective groups and authors... who in the end threaten to vote against the BILL, if their legislative baby does not survive. That is exactly what happened in the last 7 days to HR 3221.
HR 3221 was portrayed to the public as the "end-all" for homeowners who are in desperate straights with their mortgages. In my opinion, as a homeowner and REALTOR, the initial concept of HR 3221, Foreclosure Prevention Act of 2008, the Senate version and American Housing Rescue and Foreclosure Prevention Act of 2008, the House version was initially intended to help the homeowner escape the looming potential for foreclosure. Fortunately, that portion of HR 3221 survived pretty much in tact.
Somewhere along the line, Congress added the Housing and Economic Recovery Act of 2008, both the House and the Senate had their own versions of that portion of HR 3221 too. Then... one of our congressional wizards in the House came up with the New Direction for Energy Independence, National Security, and Consumer Protection Act, adding that component also to HR 3221. But it didn't stop there... nope... the nation began to really feel the pain at the gas pump so... enter the Renewable Energy and Energy Conservation Tax Act of 2007. Now, tell me... how the heck do we go from helping folks stave off foreclosure to "Renewable Energy and Energy Conservation Tax Act". It's simply amazing!
Each additional component of HR 3221 carried with it, its own set of lobbyists, special interest groups and of course, hours and days and weeks and months of debate in both houses. At one point, President Bush threatened to veto the BILL for reasons, yet unclear to me. Nevertheless, to appease the President and his pals on Capital Hill, more garbage was rolled into the BILL and two weeks ago, the crowning touch was added to HR 3221. Congress agreed to add a component to HR 3221, SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE. This sneaky, underhanded, despicable, hurtful, lousy addition to the BILL not only stripped away all forms of DPA (Down Payment Assistance) program help for the FHA buyer, but... to add some salt to the wound of the already bleeding pool of potential home buyers, our brain dead House of Representatives, also saw fit to increase the minimum FHA down payment requirement from 3% to 3.5% of the purchase price.
Even though FHA loans are not FICO driven, due to the recent mortgage meltdown, most... if not all, lenders are simply scared to death to make loans to buyers who don't fit the more stringent guidelines of conventional loans. It isn't bad enough that lenders, who are processing FHA loans will not even look at an FHA buyer unless he/she passes muster under Fannie/Freddie guidelines. Now Congress and our current administration sees wisdom in making it even more difficult for FHA buyers to secure financing. This means that an FHA buyer buying a $200,000 home must now bring an additional $1,000 to the closing table. And... this same buyer is now also paying upward of $4.50 for a gallon of gas. It appears that Congress and our current administration has lost all sight of the plight of the "little guy". Some how they find justice in forcing the average working class home FHA buyer to belly up to the bar, and suck it up. In this REALTORs opinion, there is NO logic in adding Sec. 2113 to HR 3221. The President should use his "Line Item" veto authority and rip this component out of HR 3221 when he signs the law into affect this week.
The bottom line is just this... if you are a buyer, in the market for a home under the current maximum FHA limit of $346,250 and if you were planning on taking advantage of a (DPA) Down Payment Assistance program such as AmeriDream, Nehemiah, DOVE or any other charitable down payment contribution loan vehicle, you MUST, MUST, MUST, secure your loan NOW. You MUST connect with a licensed real estate professional and then get allied with a reputable lender and get your home loan approved NOW. As of October 1st 2008, any home buyer, who wishes to use the FHA lending platform, will not be able to use any form of DPA loan.
If the President really understood what this component of the HR 3221 bill meant to buyers all over the nation, he might... just maybe... rethink using his "Line Item" veto authority and remove Section 2113 from HR 3221 when he signs the BILL into law this week.
We truly hope that President Bush will rethink what he is doing when this law gets signed. Overall, the HR 3221 is a good bill. However, who ever the brain dead politition or group of polititions was/where, who authored this amendment, simply doesn't care about the working class FHA Buyer. That said... the amended component, SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE is simply BAD for FHA buyers, BAD for the Real Estate Industry and simply BAD for the economy.
Lori & "G-II are REALTORS with Coldwell Banker Residential Brokerage in Phoenix, Arizona. You can reach us at (602) 796-5674 or eMail us at Lori.and.G-II@GoAirForceHomes.info or Lori.and.G-II@RealEstateInPhoenix.net.