House passes Mortgage Rescue Bill
So yesterday the House passed the Mortgage Rescue Bill. This document is about 700 pages long so all the details have yet to be known but there are some good things about it and in my opinion some bad. The bill authorizes FHA to insure up to 300 billion in loans.
So what are the positives and negatives about this bill you ask?
The good news is for first time homebuyers. The bill includes a tax credit of up to $7,500 for first time home buyers who purchase a home between April 9th, 2008-July 1st, 2009. It also allows people who don't itemize their taxes to claim a $500-$1,000 dollar decuction on their property taxes. That really benefits homeowners who have paid off their loans and can't claim a deduction. These two parts of the bill I really like as it promotes home ownership and paying off your mortgage since you can still get a larger tax break on your property taxes even though you
don't get the mortgage interest deduction since the mortgage has been paid off.
The plan also includes a new cap of up to $625,000 on loans that Fannie Mae and Freddie Mac buy and loans that the FHA may insure. It would permanently increase the conforming and FHA loan limits up to $625,000 from $417,000. This would allow borrowers who are in a higher interest jumbo loan to refinance into a lower conforming rate loan.
The bill also would allow FHA to insure loans where borrowers are upside down in equity if the current lender is willing to forgive some of the mortgage debt. So in order to avoid foreclosure or a possible short sale the lender would have to agree to write off the debt and FHA would insure the remaining amount based off the current appraised value. While this is good for a home owner in distress it is not good for the lender for sure nor is it good for the government as someone has to pay for this loss. Who do you think is going to pay for this? Correct you and me the American tax payer who pays their mortgage and bills on time! If Obama is elected taxes are for sure going to have a dramatic increase but even if McCain gets elected I don't see how taxes cannot go up some to help pay for this mess we have gotten ourselves into. We are in unprecedented times the U.S. economy has not seen as poor a housing market as this in decades. Couple that with the increasingly weak U.S. Dollar and the high cost of oil and gas and we are in for a tough ride before we get out of this mess.
Really there is no perfect answer if we just ride out the storm and let all the home owners foreclose the housing market and economy will get worse. If we let the government rescue them and pay out billions the economy is negatively affected too.
Feel free to email me your thoughts at dchappy7@gmail.com
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