Housing and Economic Recovery Act of 2008

What does it mean???

Taken from http://en.wikipedia.org/wiki/Housing_and_Economic_Recovery_Act_of_2008

The Housing and Economic Recovery Act of 2008 (Pub.L. 110-289, H.R. 3221) designed primarily to address the Subprime mortgage crisis, was passed by the United States Congress on July 24, 2008 and signed by President George W. Bush on July 30, 2008. It authorizes the Federal Housing Administration to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers if lenders write-down principal loan balances to 90 percent of current appraisal value. It's intended to restore confidence in Fannie Mae and Freddie Mac by strengthening regulations and injecting capital into the two large U.S. suppliers of mortgage funding. States will be authorized to refinance subprime loans using mortgage revenue bonds.

Basically it will allow homeowners to keep their homes and refinance with loans at discounted rates for 90% of a home's current appraisal value if the lender who holds the original note is willing to take a loss.  You might think why would the lender want to take a loss?  My feeling is that lenders should be willing to do so, due to the fact that that so many homes are going to Foreclosure and are being sold as a Short sale (real estate), which costs lenders more money as they can lose between 30-50% of the appraised value after factoring selling costs.

Here's what the Government says:

An Excerpt taken from Department of Housing and Urban Development website at: http://www.hud.gov/news/recoveryactfaq.cfm

Q: How will the law help struggling homeowners keep their homes?
A: Through the Federal Housing Administration (FHA), an estimated 400,000 borrowers in danger of losing their homes will be able to refinance into more affordable government-insured mortgages. The program offers government insurance to lenders who voluntarily reduce mortgages for at-risk homeowners to at least 90% of the property's current value.

Q: How will this law make it more affordable to own a home?
A: There are a number of provisions that will make homeownership more affordable:

• Creates a refundable tax credit for first-time homebuyers that works like an interest-free loan of up to $7,500 (to be paid back over 15 years).
• Grants states $11 billion of additional tax-exempt bond authority in 2008 that they can use to refinance subprime loans, make loans to first-time homebuyers and to finance the building of affordable rental housing.
• Raises conforming loan limits for the FHA, Fannie Mae and Freddie Mac to $625,500. Because of the high cost of housing in California, a majority of the state's residents were previously shut out from these programs. Raising these loan limits will lead to lower interest rates on some loans, greater refinancing opportunities, and enable more borrowers in high cost areas to avoid the type of nontraditional and frequently abusive loans that led to the current crisis.
• Provides couples using the standard deduction with up to an additional $1,000 deduction for property taxes ($500 for individuals).

Written by Mark Gonzales Copyright 2008

Mark Gonzales is a Realtor for RE/MAX On The Boulevard, one of the Top 100 brokerage firms in the country.  He possesses a Bachelor's of Science in Business Administration with a Concentration in Real Estate from California State University, Northridge and is considered to be an innovator in marketing homes.  For permission to repost this blog please send an e-mail with 'REQUEST TO REPOST BLOG" in subject line to markgonzales100@yahoo.com.