Wednesday, July 23, 2008 (Roll Call #519) the US House of Representatives passed HR 3221; The Foreclosure Prevention Act of 2008; 272-152, 11 not voting. Shortly thereafter on Saturday July 26, 2008 (Roll Call #186) the US Senate passed HR 3221; 72-13. Both branches of our government passing the bill by an overwhelming majority intending to send a message to the American public that our leaders are trying to bring some relief to those in need as well as stimulate the housing market. President Bush is expected to sign the bill on Tuesday, July 29th. The bill encompasses the following:
National Association of REALTORS® Summary of Key Provisions of HR 3221 (as of 7/28/08)
- GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
- FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
- Homebuyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).
- FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
- Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.
- VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.
- Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision does will be effective from October 1, 2008 through September 30, 2009.
- GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.
- Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.
- National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.
- CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.
- LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.
- Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.
As a real estate broker in the residential sector, I of course am all for legislation that will hopefully at least help to get things truly moving again. This bill certainly offers some benefits that if you qualify for the why not go for! With any luck this bill will not only help prevent further foreclosures but will also stabilize housing prices and values.
Now... not to play devils advocate but I also like to understand all of the potential consequences of not only my own actions but those effecting me, my family, my friends, my kid, my nation... So I have done some reading from those who question HR 3221. In my quest for knowledge I ran across an article written by Fred Cederholm, who brings attention to the snowball effect that is rolling through the mortgage industry and real estate markets across our country. He nut shells the financial picture of what has been happening and how it has taken on a life of it's own and likens HR 3221 to an "umbrella in a hurricane". Easy read and makes you think.
Continuing along that same line of things that make you go hmmmm... I ran across this video which again got my wheels spinning. Seems to me that our country in between the proverbial rock and hard place... and in so many ways! I could seriously digress so I'm going to stop here :o)