This is a summary provided by the National Association of Realtors®
yesterday ( 7/28/2008 ) - under each section I will translate into English
because much of this sounds like it was written by lawyers.
The NAR summary will be identified with a bullet point, my commentary identified as NOTE:
Following is a summary of the key provisions of HR 3221 - The
Housing Stimulus Bill of 2008 as reported by the National Association
of Realtors® on 7/28/08:
- H.R. 3221, the “Housing and Economic Recovery Act of 2008″, passed
the House on July 23rd by a vote of 272-152. On Saturday, July26th, the
Senate passed the bill by a vote of 72-13. the President is expected to
sign the bill on Tuesday, July 29th. It includes:
NOTE: As of 7/29/08 this bill has not been signed by
President Bush. Although there are many things that sound “good” in
this 700 page bill, there are many in Washington that are not happy
with all the “other stuff” that’s been squeezed in there. President
Bush has indicated that he will sign the bill, no word about it being
delayed.
- 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 ).
NOTE: Fannie Mae and Freddie Mac are Government Sponsored
Entities (GSEs), they are not government run (yet) like FHA. Their
primary purpose is to purchase mortgage backed securities. They are
currently regulated by the Office of Housing and Enterprise Oversight
Committee. I’m not sure yet what an “independent regulator” would
consist of. Note to self, get more information on that. Making the
conforming loan limit increases permanent is a very interesting
prospect.
It seems that with housing prices dropping the way they are that
would not be necessary. This does enable Fannie and Freddie to purchase
mortgage backed securities that used to be considered “Jumbo”. This is
good news because there is absolutely no secondary market for Jumbo
loans now and those banks still offering these loans have rates
starting in the high 7% range.
- 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 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 )
NOTE: Permanently increasing the FHA loan limits is a very
good move. The loan limits have been antiquated for quite some time.
This will allow many more people to qualify for FHA financing in states
like California. Not sure what the streamlined processing for condos,
reform to the HECM, and reforms to the manufactured housing program
will entail. I will report on that when we find out more.
Program reforms go into effect immediately - loan limits after temporary increase expires at the end of the year.
- Home Tax Credit - a $7,500 tax credit that would be available for
any qualified purchase between April 8, 2008 and June 30, 2009. the
credit is repayable over 15 years (making it, in effect, an interest
free loan).
NOTE: This is phenomenal. I have heard a couple of versions
of this so i’m not going to get too excited but this is a powerful
program and a great incentive to buy in the next year. I have heard
that it will be broken up over 3 years but there is no mention of that
in this summary from NAR. The $7,500 is not free money, however it is
interest free. It will be paid back over 15 years, i imagine it will
just be added to your taxes due on your returns - if i did the math
right, that’s about $500 a year….not bad. Stay tuned for this one
- any way you slice it this is a great feature of this bill.
- 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.
NOTE: Ok, this is a clarification on earlier reports. The
caveat of this program is that lenders are not required to participate
in this write down, they must volunteer to forgive loan balances down
to current market value, 85% of current market value no less. I just
don’t anticipate this going over well with most lenders and I believe
they will be slow to adapt - you can read more about my opinion of this here.
Although it’s not mentioned here, I have also read and reported that
the lenders will have to pay a 3% fee to FHA and there will be an
upfront mortgage insurance premium to the owner of 1.5% of the loan
amount and a monthly mortgage insurance premium of .50. If this is
consistant with FHA loan now, that upfront PMI can be financed into the
loan.
Wait a minute now, hold the presses! FHA is entitled to 50% of
future appreciation? This is the bottom of the market right here
folks. If your home is being re-valued at current market value then
you have nowhere to go but up right? I know reporters are not supposed
to interject their personal feelings into a story…so it’s a good
think i’m not a reporter…this is something I am going to keep an eye
on. Another question that comes to mind is will the county tax
assesors adjust your property tax base to this new value? It’s time to
start asking more questions I think.
Finally, the loan limit of $550,440 nationwide is a good move. This is going to help a lot of people.
- Seller funded downpayment assistance programs - codifies existing
FHA propposal to prohibit the use of downpayment assistance programs
funded by those who have a financial interest in the sale; does not
prohibit other assistance programs provided by nonprofits funded by
other sources, churches, employers, or family members. This prohibition
does not go into effect until October 1, 2008.
NOTE: This is unfortunate. HUD has had it in for Nehemiah,
AmeriDream, HART and the sort since last year. My guess is that these
charities will find a way to survive through private funding. Possibly
putting home sellers on a “do solicit” list and hound them until they
give? I don’t know…it’s a guess.
These organizations have helped many families achieve home ownership
that otherwise would not have been able to. This bill simply states
that FHA will not allow down payement assistance from someone that is
set up to financially benefit from the transaction and the gift. Fair
enough. These organizations I imagine will continue to operate
somewhat in the style of city and state down payment assistance
programs and try to acquire funding through government grants and
donations. I’m confident that they will exist in some fashion or
other, maybe just not the way they do now.
- 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.
NOTE: I don’t quite understand the temporary part of this. I
suspect that it’s a set up for an extension at the end of the year,
possibly a grand finale by the Bush administration to help Veterans.
It’s a very good move as far as i’m concerned, even if it is temporary
for now. We don’t do enough for our country’s Veterans as it is.
- Risk-based pricing - puts a moratorium on FHA using risk-based
pricing for one year. This provision will be effective from October 1,
2008 through September 30, 2009.
NOTE: As part of the expansion of FHASecure, HUD implemented
risk based pricing into thier mortage insurance model. It basically
raised mortgage insurance premiums on homebuyers that were on the
lowest end of the credit tolerances when being approved for FHA loans.
I see their point, i just don’t know if it’s good for tax payers. It
looks like it’s just a temporary measure to stimulate the housing
markets again by the end of 2009. That, i’m ok with.
- 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.
NOTE: This is a very positive move by the Treasury Department
and will go a long way toward shoring up consumer confidence and
stimulating the secondary market.
- Mortgage Revenue Bond Authority - authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.
NOTE: I do not have enough information to comment on this.
- CDBG Funding - Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes
NOTE: Community Development Block Grants. There are already
reports of cities buying up foreclosure homes fixing them up and
reselling them. This is an important move by responsible
municipalities to revitalize hard hit communities and help home values
recover quicker. I imagine these monies will be distributed
proportionately to those areas of the country that have been hit
hardest by foreclosures.
- LIHTC - Modernizes the Low Income Housing Tax Credit program to make it more efficient.
NOTE: I do not have enough information to comment on this.
- 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 the 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.
NOTE: This is a move that many in the mortgage industry have
been in support of. There is too much inconsistency from State to
State in regards to licensing requirements and regulation. I do not
know enough about these new requirements to comment further. I will do
more research and report back.
As we wait for President Bush to sign this bill I’m sure more and
more details will come out. I encourage you to comment and engage in
debate about this bill so that we can disseminate details as we get
them.
For questions, comments or conversation about H.R. 3221you may call me on my cell phone at 714-336-8286
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