I heard Barry Habib from Mortgage Market Guide speak about the new provisions for The HR 3221 Bill, and how it will effect your business.

Realtors, right now is the best time to get your borrowers off the fence, because they might not be able to buy a home, here in the next couple of months.

I wanted to give you the highlights of his interview.

FHA Changes:  

 

To use Seller Funded Down Payment Assistant (DPA, Nehemiah), final underwriting must be completed by September 30, 2008.  This type of DPA will not be available after September 30.  Two out of every three FHA loans are currently using Seller Funded DPA so it is important to act now!

 

FHA minimum cash investment requirements are increasing to 3.5%, from 3%.   

 

MIP will increase after October 1, 2008.  HR 3221 increased the cap on MIP from 2.25% to 3%.  Per FHA policy, FHA has filed the amount they want the cap to be with the Office of Management and Budget (reported to be between 2.25% and 3%, but closer to 3%).  This is another reason to act now!

 

Visit www.Hud.gov for FHA loan amounts in your area. 

 

OPPORTUNITY:  The main message to communicate to Realtors, renters, and prospects is to act now!  For a short time longer, they can still take advantage of seller down payment assistance and lower minimum cash investment requirements.  They also may be able to get double advantage with the new tax credits (see below).  This is the perfect time to position yourself as an expert!

 

Tax Credits: 

 

First-time buyers and people who have not owned a home in the past three years will get a $7,500 tax credit if they purchased a home on or after April 9, 2008 or if they purchase one before July 1, 2009. 

 

Income limitations are:

 Married couples with incomes less than $150,000 qualify for the entire tax credit.  The tax credit phases out for married couples with incomes between $150,000 and $170,000.  Couples with incomes exceeding $170,000 do not qualify for the tax credit. 

 

 Singles with an income less than $75,000 qualify for the entire tax credit.  The tax credit phases out for singles with incomes between $75,000 and $95,000.  Singles with incomes exceeding $95,000 do not qualify for the tax credit. 

 

The tax credit is really an interest-free loan from the government that must be paid back over fifteen years, in increments of $500 a year. 

 

If you die, your heirs do not have to pay back the remaining balance.

 

If you sell your home before fifteen years have passed and your home's appreciation is less than the amount you have to pay back, the loan is forgiven.

 

• If you turn your home into a rental or investment property, you must pay back the balance due.

 

OPPORTUNITY:  People who have been on the sidelines can take advantage of this tax credit by acting now.  Share this information with:

•1.     listing agents so they can put it on open house flyers. 

•2.     divorce attorneys since the liability for the loan goes to whoever gets the home.

•3.     past clients who purchased a home on or after April 9, 2008 and who qualify for this tax credit.

 

Conforming Jumbo Loan Limits: 

 

The floor for Jumbo Loans will remain at $417,000, despite the depreciation in home prices.

 

The ceiling for Jumbo Loans will decrease from $729,750 to $625,500 as of January 1, 2009.

 

OPPORTUNITY:  Jumbo homebuyers in some markets have retained the ability to finance at lower interest rates.  Inform listing agents, buyer's agents, and prospective homebuyers in applicable markets of the upcoming change to the Jumbo Loan ceiling.

 

Hope for Homeowners:

 

The bill helps homeowners who are currently upside down on their homes and owe more than their homes are now worth.

 

Mortgages must have been originated prior to January 1, 2008.

 

Borrowers must:

•1.     Certify that they did not default intentionally (there is penalty of jail if they are found to lie here).

•2.     Have had a DTI ratio over 31% as of March 2008.

 

The lien holder will work with the borrower to write down the mortgage to no more than 90% of the appraised value.  For example, if a borrower owes $300,000 but the home is worth $250,000, the borrower will receive a new loan for 90% of $250,000, which equals $225,000.  The $75,000 difference is forgiven. 

 

The lender shares equity in the property going forward, on a sliding scale:

•1.     If the home is sold within one year, the lender receives 90% of the appreciation and the home owner receives 10%.

•2.     If the home is sold within two years, the lender receives 80% of the appreciation and the home owner receives 20%.

•3.     If the home is sold within three years, the lender receives 70% of the appreciation and the home owner receives 30%.

•4.     If the home is sold within four years, the lender receives 60% of the appreciation and the home owner receives 40%.

•5.     If the home is sold after five years, the lender receives 50% of the appreciation and the home owner receives 50%.

 

OPPORTUNITY:  There's a big opportunity to educate clients and strategic partners.  By adding value and positioning yourself as an expert, you build trust, strengthen your relationships, and pave the way for future business.  Also, informing clients and partners of this information will help strengthen home values and the economy overall.

 

Licensing: 

 

SAFE Mortgage Licensing Act was created to "encourage" a nationwide licensing and registry system.  In the next few years, individual states will:

 

•1.         Establish a minimum net worth for recovery fund requirements.

•2.         Require originators to register with the National Registry and obtain a unique identifier number.  This will help regulators track individuals and prevent originators who receive complaints in one state from starting a new origination practice in another state.

•3.         Develop a state license program.

•4.         Require pre-licensure education.

•5.         Require eight hours of continuing education every year.

 

OPPORTUNITY:  More bad actors out of the business and the ability for our industry to regain the public's trust.