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How Does Housing Recovery Act Help Okemo Mountain Home Buyers

By
Real Estate Agent with Bean Group

President Bush signed into law recently The Housing and Economic Recovery Act. This is the most sweeping change to housing reform since the New Deal of 1934. It is designed to assist more Americans invest in home ownership and shore up the faltering housing and mortgage markets. Like any legislation, it comes with the good and the bad. I encourage you to write your Congressmen to see if we can get legislation to revoke some of the bad.  For example, effective October 1, 2008, FHA will increase the minimum required down payment from 3% to 3.5% for Ludlow and Okemo Mountain home buyers. The legislation also calls for the elimination of seller down-payment assistance programs such as AmeriDream and Nehemiah by October 1, 2008.

 

As of July 14, 2008, upfront MIP premiums became risk-based on credit scores and the annual premium increased across the board. Instead of the original plan of making FHA loans more affordable for potential Okemo Mountain home buyers; the new legislation is doing the exact opposite and makes it more expensive.

Details of the Housing and Economic Recovery Act:

Here are some key provisions of the Housing and Economic Recovery Act that most affect Okemo Mountain home buyers:

  • 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).
    View 2009 FHA and GSE loan limit estimates (PDF)
  • 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 down payment requirement on FHA loans will go up to 3.5% (from 3%). 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).
    View 2009 FHA and GSE loan limit estimates (PDF)
    FHA Reform Chart (PDF)
  • 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.
    FHA Foreclosure Rescue Chart
  • 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 is 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.
  • 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.

It remains to be seen the overall effect the Recovery Act will have on both the individual home buyer and the housing industry as a whole.

From the Experts: 

"We're going through a major financial crisis...let's be clear: Fannie and Freddie can't be allowed to fail. With the collapse of subprime lending, they're now more central than ever to the housing market, and the economy as a whole."
- Paul Krugman, Professor of Economics at Princeton and New York Times columnist, 7/14/2008

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Comments (4)

Judith Reppert
United Country Countryside Realty - Mount Vernon, MO

Irene, thanks for this helpful summary and links, I've printed the FHA foreclosure piece for reference.

Aug 15, 2008 10:06 AM
Debbie DiFonzo
Debbie DiFonzo - United Country VIP Realty, SW Missouri - Lebanon, MO
Lebanon MO and Buffalo Missouri Real Estate

Wow - great information all in one spot. Thanks for this handy guide Irene.

Aug 15, 2008 04:20 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thanks for the post. I have been thinking of writing something to hand out at my open house.

Aug 15, 2008 10:56 PM
Leigh H
1st American Heritage - El Lago, TX

Irene-

Very good information. I also wanted to add a website where people can go to help stop the downpayment assistance ban. http://www.dpagroundswell.org/ the more people that go here and make comments or use the badges and buttons on their email the more the word can spread and we might be able to save it.

Also another update, if you already had posted this I apologize but wanted to make sure that people are aware that some politicians are trying to save dpa. I got this off of the Nehemiah website

H.R. 6694

A bill introduced by Representatives Maxine Waters, Gary Miller, Al Green and Christopher Shays on July 31, 2008, that would reinstate SF-DPA. If passed and signed into law, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) will allow downpayment assistance to continue indefinitely.

 

So the more we let our lawmakers know how important this is the better off we will all be.

 

Thank you

Aug 25, 2008 08:19 AM