Bill HR 5830. Good, bad or too soon to tell?

By
Real Estate Broker/Owner with Tutas Towne Realty, Inc and Garden Views Realty, LLC BK607690

Save my home!!!!Hi folks. I am writing today to pick your collective brains a little. Have you heard that the House of Representatives recently passed a bill, H.R. 5830, named the Federal Housing Administration (FHA) Housing and Homeowner Retention Act?

From what I've read, and understand, this Bill will give distressed Homeowners an opportunity to refinance with FHA at 90% of value IF their current Lender will agree to a short payment.

One of the caveats is that the FHA will own a piece of the action. When the borrower sells they will either pay, from any profits, a 3% exit fee (a percentage of the original loan amount) to the FHA or a declining percentage of any net proceeds, attributed to appreciation, (from 100% in the first year to 50% in year 4 or after) whichever is larger.

I guess this FHA participation, in the appreciation, is to prevent speculators and second homeowners from participating. This Bill is designed specifically to keep folks in their homes.

My first thought is WOW!!! How great would this be to assist folks that are facing foreclosure who are in a short sale position? How receptive will lenders be to accepting a short sale at 90% of value?

Then I start thinking about FHA owning a piece of the appreciation. Basically they would now be an equity partner to the homeowner.

OK, I need to get my head around this. You can find Bill H.R. 5830 here. Please help me to understand the pros an cons of this Bill. What are your thoughts?

Sell Poinciana Real Estate Poinciana Real Estate Poinciana Real Estate Poinciana Real Estate Agent

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Bryant Tutas
Broker/Owner
Tutas Towne Realty, Inc
Licensed Florida Real Estate Broker
http://www.brokerbryant.com/
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Tags:
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Rainmaker
613,042
Sharon Simms
Coastal Properties Group International - Christie's International - Saint Petersburg, FL
St. Petersburg FL - CRS CIPS CLHMS RSPS

First - there are so many proposals/programs out there now that I think agents should use the "deal with a professional" rule and look to a reputable lender for interpretations and ramifications.

Second - so many of these proposals seem to be for lender-protection/bailout rather than the homeowners. I think they are dragging out and prolonging any recovery and contributing to a declining market. Let the boom fall to the bottom so we can begin recovery.

Third - it just seems wrong to be doing so much for people who made wrong financial decisions, and doing nothing for those people who scrimped to have a fixed rather than an adjustable, nothing for those people who are working 2 and 3 jobs so that their payments will stay current.  

May 04, 2008 02:42 AM #36
Rainmaker
33,635
Bob Wilson
Access San Diego - San Diego, CA

>so many of these proposals seem to be for lender-protection/bailout rather than the homeowners. I think they are dragging out and prolonging any recovery and contributing to a declining market. Let the boom fall to the bottom so we can begin recovery.

this doesn't bail out lenders. it saves homeowners. 

>it just seems wrong to be doing so much for people who made wrong financial decisions, and doing nothing for those people who scrimped to have a fixed rather than an adjustable, nothing for those people who are working 2 and 3 jobs so that their payments will stay current

How many homes did you sell to people who made wrong financial decisions? 

It actually does quite a bit for for those people who have fixed rates, etc. Every distressed sale that doesn't hit the market is good for every other homeowner in the neighborhood.

May 04, 2008 03:55 AM #37
Rainer
116,814
Rich Schiffer
Swarthmore, PA
Referral Agent, e-PRO
"Let the boom fall to the bottom so we can begin recovery." I strongly disagree with that statement. It make about as much sense as a pilot saying, "let the plane crash so the engineers can build a new one." We have a responsibility not only to fix what is broken now, but to do it in a way that will prevent the problem from recurring.
May 04, 2008 04:11 AM #38
Rainer
16,948
Thomas Brewer
Premiere Properties - Arlington, TX
The reality of this is that it will have litttle to no impact. The FHA can endorse any program that it feels is appropriate however the lenders do not. The horse has already left the barn on the issue and you will not find to many interested lenders that will clear this re-finance to close. The FHA say's it still does many things, however they do not lend the money. Great politics that would have been better suited 1 year ago.
May 04, 2008 04:31 AM #39
Rainer
201,303
Mana Tulberg
805 County Real Estate - Camarillo, CA
Real Estate Agent - Camarillo CA
Broker Bryant, Is this bill to help the Lenders or Homeowners? As I was reading the bill I got a little lost. Now mind you, it's Saturday morning here and I have not even finished my first cup of coffee, :0)
May 04, 2008 04:43 AM #40
Ambassador
1,509,132
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I read this and think it is rather clever as far as "holding time" goes.  This buys 5 years for the homeowner with the absolute intent to keep their property.  I think the requirement should be that the home is owner occupied currently, has been owner occupied since it was bought and will be owner occupied until it is sold.

My thoughts since most (not all) of the homes going back to the bank are rentals or investment props.

May 04, 2008 04:55 AM #41
Rainmaker
608,076
Eric Bouler
Gardner Realtors, Licensed in La. - New Orleans, LA
Listening to your Needs
Lets see the amendments before saying. Its better to make the feds a watch dog which they continue to fail at.
May 04, 2008 06:19 AM #42
Rainmaker
1,142,060
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

Excellent comments! I posted this because I truly am clueless on aLl the ramifications of this Bill. It sounds good to me BUT I'm sure there is more to it. I think Lenn hit on some of my major concerns.

As a side note, I have some very elderly folks that I have written about several times, The Lovelys. They have been struggling for 2 years now to be able to keep their house, they have lived in for 16 years. They did make some bad decisions along the way to get them to where they are now. Which is in their 80s on a fixed income and owing about $190,000 on a house worth $139,000, maybe. They have no other assets or savings. Anyway, about 2 months ago I wrote a post about NACA.  Based on the responses I received on that post I hooked The Lovelys up with NACA and a loan counselor. Just last week they signed a modification on their 1st mortgage that was negotiated by NACA and ended up getting a 30 year fixed at 7.25%. It was previously an ARM that had just adjusted to 11%!!!! Their payment has dropped about $300 a month which is about 10% of their fixed income. So it was a big deal for them.

THE LOVELYS AND NACA.

The reason for this post is the same. To try and find out as much as I can about programs that may be able to help some of the folk in Poinciana that are struggling. Heck I can't sell any houses right now I might as well try to help some people. Maybe I'll get paid later:) 

May 04, 2008 06:46 AM #43
Rainer
407,371
Sean Allen
International Financing Solutions - Fort Myers, FL
International Financing Solutions

Hey BB,

I think it is a beneficial way that FHA is trying to bail people out and then reap some profit when the house sells, if there is any profit .... BUT I doubt many people will be able to take advantage of this program. Back when the mortgage business was hopping and people were buying properties like hot cakes, most borrowers qualified via a "stated" loan and therefore did not have to verify their income. Now, in order to qualify for the FHA program it will be a full doc qualification. .... Most of these people won't qualify. Another thing is that I doubt many lenders will openly "give up" money so that a home can be refinanced at a realistic value. Most of the people at these lending institutions do not think about the consequences very clearly and will most likely just let the home go to forclosure than to openly accept a loss.

Just my opinion.

Sean Allen

May 04, 2008 07:22 AM #44
Rainer
6,598
George Doumaney
Oceanside Mortgage Group Inc - Providence, RI

Great topic.  The biggest issue I see is the 90% value / loan amount.  I have clients who's home are at least 30% underwater!  $500,000 loans and I can't even get the appraisals on the home to even come close.  What we need congress to focus on is how is the short sale and foreclosed property going to be evaluated for the FHA Short Refi Program, and is FHA saying 90% of value or 90% of Loan balance?  If it is 90% of value I think it is going to be a hard sell to the current mortgage holder to do this.  For example 500K loan, house appraises at 350K + take 10% off for the FHA program, that is potentially, a 185K write down for a bank... Unsure if they will go for it.  But it would SOLVE some huge issues.... 

 

-George
May 04, 2008 07:25 AM #45
Rainmaker
1,142,060
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
George, My understanding is that this is 90% of VALUE. While it is certainly a huge write off for the original lender it may be better than the alternative.....which is foreclsoure. This is designed for distressed owners so their lender is going to have to deal with a loss one way or the other.
May 04, 2008 07:50 AM #46
Rainer
82,653
Justin Williams
Independent - Virginia Beach, VA
Loan Officer
Too soon to tell because it still has a lot more hoops to go through including a re-investigation for the Federal Reserve Board.  My feelings will be a lot of mashups and tweakings are going to be made but this is definitely something to keep your eye on for the future. 
May 04, 2008 08:31 AM #47
Ambassador
557,018
"The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW.
President-Tutas Towne Realty, Inc. - Kissimmee, FL

It's a little late in this thread to ask a question...

But...I'll ask it anyway.

                                                     Is this the Bill the President was babbling about last week on TV?

TLW...ROAR!

May 04, 2008 09:04 AM #48
Ambassador
890,780
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy
Unintended consequences are the key words to ANY government proposal.  It is something that is always wandering around the room, not in direct view, but seldom out of sight.  This bill looks like it will have some bad unintended consequences...
May 04, 2008 03:12 PM #49
Rainmaker
1,484,012
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info
I see you got over your constipation without any ill effects.
May 04, 2008 10:07 PM #50
Rainer
141,840
Karen Luke
South Metro Property Management, LLC - McDonough, GA
Henry County Real Estate

I'm back again to see what others had to say. A few seem to be concerned about the major issue I'm concerned about ---the slippery slope of the appaisal in the "declining areas." That is a huge issue when you are talking about a 90% Loan-to-value ratio. What is the value? 90% of what?

The value number is a big variable in some areas. Then, you've got the whole issue concerning some getting helped and others not helped.

Anybody see law suits coming?

May 05, 2008 01:32 AM #51
Rainmaker
33,635
Bob Wilson
Access San Diego - San Diego, CA

>Most of these people won't qualify.

That would be true if we were talking about the original loan amount. I deal with lots of distressed sellers that would qualify for an FHA loan at 90% of the CURRENT value.  CBO estimates that this would save 500,000 homeowners.

>I doubt many lenders will openly "give up" money so that a home can be refinanced at a realistic value.

The money is already gone. The choice for the lender is short sale, foreclosure or a short refi, which is what the FHA program is.

>you will not find to many interested lenders that will clear this re-finance to close

Why not? Unlike most of the other loans they did and are still doing, these loans are insured. 

>This bill looks like it will have some bad unintended consequences...

Such as? 

 

May 05, 2008 02:11 AM #52
Ambassador
2,739,883
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I read that post.  It was very interesting.  He mentioned the fact that Short Sales have been around forever and only now are problematic. 

 

May 05, 2008 10:01 AM #53
Rainmaker
176,383
Rebecca Levinson, Real Estate Marketing and Online Advertising Consultant
Real Skillz-Clear Marketing for Your Real Estate Vision - Lake Geneva, WI

I was with Bryan and Tom on this one.  But my comment that I was going to make was the same as Russ's comment above, "But will the homeowner make their payment thereafter".  It's nice to have the help there, but I think so much of the bigger problem is, "Could these folks truly afford the house in the first place".  Is it prolonging the inevitable for some?

I don't think the problem is just with the adjustables as Sharon points out above.  While this is the focus of many recovery programs, I am sure there are folks who were able to get a conventional mortgage (because getting a conventional back in the early 2000's wasn't that hard- remember?) that are having problems now too.  It's not because all of those folks scrimped and saved, they just didn't have bottom of the barrel credit.

May 06, 2008 06:44 AM #54
Rainmaker
33,644
Susan Zanzonico
Berkshire Hathaway Home Services - Morristown, NJ
Sellers/Buyers Agent, Morristown NJ Real Estate

Interesting post.  My thoughts, I don't really know they're rambling around in alot of different directions.  With all the short sales and foreclosures, it will definitely be interesting to see how this progresses.

May 13, 2008 04:30 AM #55
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