The Latest News on the Pending Housing Bill...Stay Tuned

Mortgage and Lending with A&M Mortgage Group 214765

FYI:  Last night the House and Senate reached agreement on a massive housing bill that affects FHA,

Fannie and Freddie, tax policy and many changes involving the housing market. The housing and mortgage crisis has caused Congress to combine these provisions into a bill exceeding 400 pages. The House will vote on the measure tomorrow, with the Senate to follow by next week. The White House has supported much of the measure but has criticized some components. Despite a prior veto threat, we expect the President will sign this bill, with final action before the August congressional recess.

Here are the major components: Capitol Hill

1. FHA Changes

Mortgage limits for high cost areas will be increased to $625,000 on a permanent basis (115% of the current conforming limit).

The FHA floor will go from 48% to 65% of the current conforming limit. This will put the new permanent floor at $271,000.

Cash downpayment is set at 3.5%

The seller funded downpayment assistance program (DPA) will be terminated on September 30.

The risk based premium established by HUD last week will be suspended on September 30. The ceiling on upfront premiums will go to 3%.

2. Fannie and Freddie

The conforming loan limit will be increased to 115% of area median up to $625,000. The bill provides for a federal "backstop" for Fannie and Freddie which allows the Treasury to capitalize the companies by taking an equity stake.

A new regulator with enhanced powers is created.

The bill creates an affordable housing trust fund paid for by assessments on Fannie and Freddie to help prevent foreclosures and facilitate affordable housing

3. FHA Rescue Fund

The bill creates a special FHA refinance program designed to allow the refinance into fixed rate FHA products of up to $300 billion in distressed mortgages.

4. Licensing

Encourages a nation wide licensing and registry system for loan originators by setting minimum qualifications and assigning responsibility to HUD for establishing new rules for those states that do not enact licensing laws.

5. Redevelopment of Foreclosed Properties

Provides $4 billion in funds for local governments to purchase and redevelop foreclosed properties.

6. Tax Incentives

Establishes a range of housing incentives, including a first time homebuyer tax credit and expands the Low Income Housing Tax Credit.

There is a great deal of detail in this complex bill and we will update you as more information is available.

Comments (4)

Dean Moss
Dean's Team - Keller Williams Realty Partners Chicago IL - Chicago, IL
Dean's Team Chicago IL Real Estate Team

Larry -

Great summary - and a step in the right direction, I would assume.

I'm sure it won't turn everything around overnight, but at least it shows the government is interested - not indifferent - to the plight of the American home owner, and the U.S. Housing Market.

Hold your breath!


Jul 25, 2008 05:19 AM
R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

Larry:  I just wrote on this topic myself, but from a somewhat different point of view.  If you don't mind (if you do, simply delete my comment) I'd like to link to that post.  It's called, "Where Would The Housing Markets Be If The Government Had Dealt With The Sub-Prime Mess In An Effective Way"

Basically, I think that the government's actions are a day late and a dollar short. Let me know what you think.


Bob Mitchell

ValueList Real Estate Services, Inc.

Jul 25, 2008 05:20 AM
A&M Mortgage Group: Larry Penilla
A&M Mortgage Group - Merrillville, IN
Northwest Indiana Mortgages - Home Loans

Thanks for the feedback Dean and Bob. I read a survey of mortgage professionals (owners, managers, and LOs) yesterday regarding the state of our industry. The thing I found amazing is how many of us are still in denial. What's done is done. Get over it and face the current realities. That said, Bob, I don't mind at all if you link to your post. It's nice to have this forum to share our humble opinions. Good luck my friends! LP

Jul 25, 2008 05:32 AM
Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058

I am not in a high cost area - does this mean my conforming limit for Conv just went DOWN to the 115% of hte median?  I just read the summary on the Senate Banking Committee site and it specifically speaks to the High Cost Areas.  In the bill - it's very confusing... thanks.

Jul 25, 2008 07:59 AM