Details of the New HR3221-Housing & Economic Recovery Act
What is HR3221?
A few days ago, President George W. Bush signed into law H.R. 3221, the "Housing and Economic Recovery Act of 2008," a sweeping $300 Billion rescue plan to help struggling homeowners avoid foreclosure, and to boost confidence in the sluggish housing market. Since then, there have been hundreds of articles, summaries, and analyses of the bill from the media, many with conflicting and inconsistent data.
It is about 2 inches thick or 786 pages. Here are some important take-aways from it that I have gleaned so far as your mortgage specialist.
1) There is a $7500 Tax Credit for First Time Home Buyers from 4/09/08 through 06/30/09. It is not a tax deduction, but a credit. Most homebuyers will benefit when they are earning up to $150,000 annually as a couple, or $75,000 as a single taxpayer. After that, it begins to phase out and completely phases out when $170,000 is reached in annual earnings for a married a couple and $95,000 as a single taxpayer. The loan gets paid back at $500 per year over the next 15 years. It is forgiven if values drop or at death during that same 15 year period.
2) There are a higher conforming limit which presently in Illinois is $417,000, the maximum is $625,500. Unfortunately, I doubt if Illinois will rise above the current $417,000.
3) FHA modernization has some new updates. There is going to be an increase in the minimum down payment from 3% to 3.5% as a minimum cash investment for all FHA loans. Gifts are still allowed from family members, etc.
4) The infamous seller-funded Down Payment Assistance (DPA) programs will be ending soon - such that credit approvals will be required by 9/30/08. These programs, such as Nehemiah and Ameri-Dream, were very successful, but there was a downside. Would you believe that the foreclosure rates were three times the normal FHA foreclosure rate which is significantly higher than the Fannie Mae and Freddie Mac foreclosure rates?
5) The Up-Front Mortgage Insurance Premium (UFMIP) as been increased from the flat 1.5% to Risk-Based Premiums that can go up to 2.25% of the loan amount based on the borrower's credit score and the LTV. This went into effect on July 14th 2008.
6) The Hope for Homeowners has a few important points to understand from a borrower's perspective. This is meant for borrowers who are upside down on mortgages they got prior to 01/08. It can help borrowers avoid foreclosure, but there are a lot of restrictions and in some cases the upside equity will need to be forwarded to the lender for the 1st five years and then split 50/50 after that time.
Rest assured that I will have more details for you about this Bill when we have had more time to read, interpret and research it.
In the meantime, feel free to contact me with any questions or issues you may have.
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