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Housing Recovery Bill 2008. What is in it?

By
Mortgage and Lending with Coastal Country Real Estate

Q: What is the Housing Rescue Bill?

A: H.R 3221, the " Housing and Economic Recovery Act of 2008". President Bush signed this historic legislation on July 30, 2008,  that props up mortgages financers Fannie Mae and Freddie Mac. The legislation authorizes $300 billion expansion of the Federal Housing Administration Loan Guarantee Programs aimed at helping troubled homeowners avoid foreclosure. 

Q: When will the bill take effect?

A: The bill will be effective by October 01, 2008.

Q: How does the bill help me as a homeowner?

A: The bill is aimed to help distressed homeowners who are at risk for foreclosure to get more affordable, government backed mortgages and get out from exotic mortgages that are not affordable.

Q: I am not in foreclosure but having a hard time paying my mortgage, do I qualify?

A: The borrower doesn't need to be in default to qualify. However, you must provide proof that you are unable to pay your current mortgage because you have to attest that you are not  deliberately defaulting just to obtain lower payments.

Q: What are the conditions to qualify?

A: These are general conditions to qualify for assistance:

  • The property must be owner-occupied.
  • Loans  issued between January 2005 to June 2007.
  • As of March 1, 2008, the borrower must be spending 31% or more of their gross monthly incomes on their mortgage payment .
  • All other loans against the home must be retired including home equity and lines of credit.
  • Borrowers may not take out a home equity loan for at least 5 years unless the purpose is to pay off needed home maintenance or repair.
  • The total debt on the home can not be more than 95% of the home's appraised value.
  • The borrower need to get FHA approval.

Q: Will I use the same lender?

A: Keep in mind this program is voluntary for your current lender. Your lender have the option to refuse to participate in the program. If your current lender agrees to writedown your loan, an FHA approved lender will buy the mortgage at the new terms. 

Q: What is a writedown loan?

A: In this case, a loan writedown means that your current lender will write off any fees and penalties against the old mortgage and accept the new mortgage amount as payment in full. In addition, they will pay the FHA a premium of 3% of the mortgage principal. Furthermore, the old lender is required to writedown the existing mortgage to 90% of it's current value.

Q: What does it cost?

A: FHA Loans come with this requirements:

  • Borrowers will pay 1.5% of the principal annually to the FHA as insurance premium for guaranteeing the loan.
  • Borrowers will share profits from future appreciation with the FHA in the form of a 3% exit fee.
  • If you sell or refinance within the year, 100% of the profits goes to the FHA.
  • After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the 5th year, where it stays.

Q: How do I benefit as a homeowner if I have to pay the FHA all this fees and profits?

A: Compared to foreclosure, even after you factor all the FHA fees, you can save a considerable amount. If your area have been hit hard by the foreclosure market, loans can be reduced as much as 40%. FHA loans will carry fixed, low interest rates that will amount to savings over the life of the loan.

Q: Do first time home-buyers benefit?

A: The bill includes a tax refund for first time home-buyers including a credit of up to $7,500.00 that will expire by July 01, 2009. The refund must be repaid over 15 years making it in effect an interest free loan.

Q: HOW DO HOMEOWNERS APPLY?

A: They need to go to an FHA approved lender. http://online-connections.org/fha_loans 

 This information is based on deemable reliable sources. If you have more questions, research if this is the option for you. Go on the Federal Housing Commission website or request for more information from an FHA approved lender offering the program.

 

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