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HR 3221, Housing and Economic Recovery Act of 2008

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Mortgage and Lending with Guaranteed Rate - NMLS#2611 - Equal Housing Lender NMLS #184394

I just read that the President should have signed or is signing this bill into law today.  If you don't know, the bill will allow the following for MN deals

  • Conforming loan and VA loan limits will stay the same at $417,000 in Minnesota, but the increase in the FHA loans will become permanent.  ($362,500 in the 7 county metro)
  • Home buyers will receive a $7500 tax credit for qualified purchases between April 8, 2008 and June 30, 2009.  The credit is repayable, which I don't understand, so if you are reading this please comment on this
  • FHA forclosure resuce (available October 1, 2008)- Lenders can write down 85% of the current appraised value and qualified borrowers would get a new FHA 30-yr fixed mortgage at 90% of the appraised value.  The borrower would then have to share 50% of all future appreciation with FHA. (more information) 
  • Down payment Assistance financed by the seller is prohibited. (See previous blog)
  • FHA will start using risk based pricing for 1 year starting October 1,2008 through September 30 2009. 
  • The Treasury Department will have the authority to buy stock from the GSE's to make sure that Freddie Mac and Fannie Mae will not fail
  • Mortgage Revenue Bond Authority - Authorizes $10 Billion in mortgage revenue bonds for refinancing sub-prime mortgages.
  • CDBG Funding provides $3.9 Billion in neighborhood revitalization funds for communities to purchase foreclosed homes.
  • Modernizes the low income housing tax credit program to make it more efficient

Please add if you are reading this and see something I missed.

Here is the actual bill.  I added it for people that needed something to put them to sleep.  Read before bedtime

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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Ken:  Getting a really close look at this thing, it really doesn't seem like it will be the big help people think it will.  FHA, when they refinance owners in trouble, gets a share in the equity of the home, regardless when you sell it, and there is ALWAYS a prepayment penalty, no matter the loan balance.  And the prior lender, just like in a short sale, needs to okay the refi to FHA.  This helps exactly NONE of my homeowners in trouble.

Jul 28, 2008 09:48 AM
Eric Frederick
Eric at Eagle Nationwide Mortgage Co. - Phoenix, AZ

The tax credit will have to be repaid over the next 10 years of tax returns (meaning basically an interest free loan for 10 years).  With the elimination of the DPA's, I think this will definitely not get people off the sidelines because while that $7500 is attractive, if you don't have the down payment available, you can't make the move anyway. 

As for refi's, the only benefit I see is that it makes the temporary raises in loan amounts permanent.  I am betting it will be difficult to get 2nd lienholders to 'voluntarily' reduce their balances owing (and the people who took out 80/20's are the primary people getting foreclosed upon). 

Jul 28, 2008 09:55 AM
Ken Graczak
Guaranteed Rate - NMLS#2611 - Equal Housing Lender - Woodbury, MN
VP of Mortgage Lending - Minneapolis / St. Paul

I am trying to understand it myself.  The fact that we won't have the DPA is going to make it tougher to get a loan and hurt the houseing market.  It was stated on Bankrate.com that 7000 people are using DPA's like Nehemiah every month.  This will prevent those 7000 people purchasing some of these forclosed homes everymonth.  I guess time will tell how bad this will hurt our buyers!

Jul 28, 2008 10:07 AM
Ann-Marie Clements
Candidate for an Ed.D. in Educational Leadership - Saint John, NB
Ed.D. candidate, Innovative Proactive Principa

Sounds like another diversion to make people "think" they are getting help.  How does that help the neighbor without a job and is about to lose his home.   This is like adding a little sugar to salt!!! 

Is the real issue for the U.S. economy to improve really being addressed? 

 

 

Jul 28, 2008 10:11 AM
Anonymous
Michael

I'm feaking out!  I just recently entered into a purchase agreement to build my first home on 7/7/2008.  Now, I'm a young engineer who has been sucessfully paying off college debt for the last 3+ years and have not been able to save up much money.  I was relying on an FHA loan and DPA to help me take advantage of the housing market and get into a house THAT I CAN AFFORD! Because I've been paying off debt for the last three years, MY CREDIT RATING IS EXCELLENT!

I have been approved for my loan an am now about to begin construction, but I may be forced to default on my purchase agreement if I can't now pony up the 3.5% on my own.  The House version of Section 2113 contained a statement:

"This subparagraph shall apply only to mortgages for which the mortgagee has issued credit approval for the borrower on or after October 1, 2008.'. "

This gave me some relief at the time because I thought as long as my loan approval date was before October 1, I was fine.......then I read the Senate version.  The Senate ammended the Bill to remove this qualifying statement, and now I'm screwed!

Even though I was talked into signing the purchase agreement and put down my earnest money with the promise CONTRACT of no money down, that may not be legal by the time I close on the house in November.  I was so excited about this Bill.....until I found out what it was really about.

Jul 29, 2008 04:38 AM
#5
Laura Moore Godek
Laura Moore Godek, PC - McHenry, IL

I thought I read the $7500 credit was for first time buyers aand had to be paid back over 15 years.

Jul 29, 2008 05:50 AM
Ken Graczak
Guaranteed Rate - NMLS#2611 - Equal Housing Lender - Woodbury, MN
VP of Mortgage Lending - Minneapolis / St. Paul

I have a couple calls into my Account Rep from Nehemiah.  It sounds like they should get there extenstion of 6 months.  I will update this blog when I find out more.

I am still trying to understand the $7500 tax credit. 

Jul 29, 2008 06:20 AM
Eric Frederick
Eric at Eagle Nationwide Mortgage Co. - Phoenix, AZ

Yes, I would imagine that Nehemiah will be able to get an injunction, although since this is actual law now and not a HUD rule (they've won that battle twice before), I don't know if they're going to be successful. 

Michael, so far as I understand, as long as the case number is ordered by September 30th, you will be fine.  HUD has issued no definitive policy yet, so I would imagine current rules will be in place.  Consult with your mortgage company (although I'm guessing you have to use the builder's preferred company and so far, I haven't met one of those that has any clue about these changes.  Yet another law that needs to be passed barring this practice).

 

Eric

Jul 29, 2008 10:12 AM
Anonymous
Laura L. Craig

Can new home buyers who used the Nehemiah to pay for down payment still get the tax credit?  Does  anybody know?

Aug 05, 2008 10:22 PM
#9
Ken Graczak
Guaranteed Rate - NMLS#2611 - Equal Housing Lender - Woodbury, MN
VP of Mortgage Lending - Minneapolis / St. Paul

The way I read it, yes. 

Aug 06, 2008 07:47 AM
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