Senate makes headway on housing fix
I know, I know.. another boring post about politics! I am sorry, this stuff intrigues me:
Last Thursday the Senate began debate on a $15 billion bipartisan housing relief package. Democrat and Republican lawmakers have been facing "election year pressure" to respond to the foreclosure crisis. The package could get a final vote this week.
There is a need for haste as housing experts agree the bill must be signed into law by July to prevent a substantial number of foreclosures in 2008. 1.5 Million subprime ARMs will reset this year with May and July being the peak months. Borrowers that can not handle the payment increase could see the foreclosure process start as early as September and lose their home by the end of 2008.
To help move the bill along, Democrats have removed the provision that would allow judges to adjust the terms of loans on principle residences for borrowers facing bankruptcy. Last month Republicans blocked a bill with this bankruptcy prevision, contending the additional risk taken on by lenders would force them to increase mortgage costs for everyone. ( http://activerain.com/blogsview/404910/Housing-Relief-Bill-HR ) This is a small victory for opponents such as the Mortgage Bankers Association that refer to this provision as "the cram down". However, there has been mention of yet another compromise that would allow judges to alter the interest rate but not the principle amount due.
So what is in the new housing relief package?
- FHA Modernization
- The bill would raise FHA loan limits for 95% of an area's median home price to 110%.
- The new FHA loan limit (temporarily at $729,950 until December 31st) would be permanently raised from the old $417,000 to $550,000.
- Increase down payment requirements from 3% to 3.5%
- $10 billion in tax-free bonds to help troubled borrowers, proceeds of which would be used to subsidized mortgage refinancing subprime borrowers. The current law only helps first-time homebuyers.
- $7,000 tax credit for homebuyers of foreclosed properties.
- Property tax deductions of $1,000 for couples and $500 for singles in addition to the standard deduction on their federal tax return. The current law allows only homeowners that itemize their deductions to deduct their property tax.
- $4 Billion in grants to state and local governments to buy and rehabilitate foreclosed homes.
- $100 Million to fund counseling for homeowners at risk of foreclosure.
- $4,000 per violation for lenders that do not properly provide truth-in-lending disclosures to borrowers 7 days prior to closing.
- Protection for veterans. For soldiers returning from service, the bill would lengthen the time a lender must wait before starting the foreclosure process from 3 to 9 months. Also, one year relief from any increase in mortgage interest rates from an Adjustable Rate Mortgage.
- $6 Billion tax benefit for home builders. Extending the time builders are allowed to write off net operating losses from 2 to 4 years. Many say this is too generous to homebuilders, but this is also projected to help save thousands of jobs.
For more information on the $15 billion mortgage fix please visit:
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