The Housing and Economic Recovery Act of 2008 is Signed into Law
Key Highlights of the Housing and Economic Recovery Act
· Effective Jan. 1, 2009, higher permanent loan limits for conventional conforming and FHA; limits to increase to a maximum amount or ceiling of $625,500, depending on the formula for each metropolitan area. Note: The temporary limits established in March will expire on Dec. 31, 2008.
· FHA floor limits will remain the same at $271,050 or 115% of local area median home price, capped at $625,500.
· 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.
· Minimum cash investment for FHA loans will increase to 3.5%.
· A moratorium on risk-based pricing for FHA loans, effective Oct. 1, 2008, as indicated in the Act.
· 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.
· Condo processing for FHA loans will be streamlined (timeline TBD).
· FHA reverse mortgages (HECM): changes, among others, include higher loan limits, availability with purchase transactions and a modification to the origination fee.
· 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.
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