How the Housing Reform Act Affects You!

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This past Wednesday (July 30, 2008), President Bush signed H. R. 3221, The Foreclosure Prevention Act of 2008, which contains sweeping measures affecting residential mortgage reform, residential taxes, REIT Investment Diversification, and veterans' housing matters. Some energy measures are addressed as well.

This Act provides a good portion of the material you might expect in the next Core Law portion of Continuing Education for real estate licensees. Moreover, there are changes in the tax code which could affect all homeowners.

Inman News contributor, Matt Carter, points out that the FHA changes in the bill are a "mixed bag" with regard to stimulating new residential sales.

On the stimulus side are such measures as 1) the $7500 tax credit for first-time home buyers, 2) an increase in the FHA loan limit to $625,500 which will allow guarantees in high cost markets, and 3) a moratorium on risk-based insurance premium pricing for FHA guaranteed loans.

On the repressent side are measures designed to reduce risks and protect the economy. These include 1) an increase in the FHA downpayment from 3.0% to 3.5%, 2) elimination of seller funded downpayments through third party non-profit assistance programs, and 3) a likely increase in mortgage insurance premiums for all mortgagors.

The downpayment assistance programs accounted for 35% of FHA sales in 2007, up from just 2% in 2000, according to the HUD source cited in the Inman article. Carter says "HUD claimed the practice artificially inflates home prices and triples the likelihood of default." On the other hand, home builders rely on these programs to assist their buyers in the lower-priced markets. The reduction in the buyer pool from the withdrawal of these assistance programs could be significant.

For a better understanding of the issues covered in this massive piece of legislation, we (at recommend that you watch for more Inman News articles on the reforms and that you glance over the Library of Congress Summary of H.R. 3221. Chances are you will be put to the test on some of its measures in the near future!



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