Last week President Bush signed the Housing Recovery Bill of 2008. The bill has several important provisions that will positively impact the market, and help deal with the sub-prime foreclosure problem.
Here are the highlights:
1. $300 billion to FHA to guaranty loans that will be made to borrowers who are facing foreclosure, and may owe more than the home is worth. The lender would have to forgive some of the principal to bring the balance down, and the government would potentially share in the upside when the property appreciates.
2. FHA, Fannie and Freddie loan limits will be capped at $625,000, and that limit will not expire in Jan.
3. $4 billion in grants to communities to purchase distressed properties and rehab them for resale.
4. Enable the federal government to infuse capital and/or buy into Fannie and Freddie as they see the need.
5. First time homebuyers will receive a $7,500 tax credit.
The bottom line is that the government has shown, once again, that it recognizes housing as the foundation of our economy, and will do whatever is necessary to keep it stable and solvent. When that means putting billions on the table, they will do it.
As a result of the $300 billion in new loan guarantees, the glut of foreclosed properties will never hit the market. Homeowners will keep their homes and avoid the hardship. Lenders and their shareholders will be able to take their hit and move on. They will avoid the cost and logistics of foreclosing on thousands of homes.
This is an outstanding bill. Bravo to Congress and the President for working together and coming up with a good law.
Jason Wilson
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