By Mikey and Steven Hall

DISCLAIMER

This article is intended to be a general discussion only and is not intended to, and does not give, legal advice or render legal opinions. The references contained herein were dated the moment they were written down. All sources listed must be confirmed by means of the opinions of the appropriate licensed professionals and/or recognized authoritative sources and any liability that might arise from your use or reliance on this article or any of its links is expressly disclaimed.

The "Housing and Economic Recovery Act of 2008," (H.R. 3221) passed the House on July 23, 2008 and the Senate on July 26, 2008. President Bush signed it into law on July 30, 2008. The program will begin on October 1, 2008 and sunset on September 30, 2011. The bill is loaded with provisions to strengthen and stabilize both the housing market and the lending industry. Some of the bill's more interesting provisions are:

The GSE's (Government Sponsored Enterprises)

The Act puts an independent regulator in place with real powers to ensure that Fannie Mae and Freddie Mac continue to function. The new regulator will have authority to raise capital standards, set internal controls, perform audits and enforce standards. The regulator can restrict executive compensation at Fannie Mae and Freddi Mac.

The Act also raised GSE loan limits for single family homes by allowing GSE loans up to 115% of the local median home price and also set up permanent loan limits from $417,000 to $625,500.

Another interesting aspect of the Act is the creation of a new permanent housing trust fund, financed by the GSEs themselves to pay for the construction, maintenance, and preservation of affordable rental housing for low income families in both rural and urban areas.

The Act includes language to authorize the Treasury to make loans to and buy stock from the GSEs to make sure that Feddie Mac and Fannie Mae do not fail.

The FHA

The Act expanded mortgage opportunities for seniors through the expanded access to reverse mortgages through the FHA (Federal Housing Administration) reform. This was done by increasing the loan limits for the program, reducing and capping lender fees for these loans, and strengthening consumer protections limiting the sale of other financial products in conjunction with the FHA reverse mortgage loans.

The FHA loan limits to were increased to up to 115% of the local area median home price, and to increase GSE loan limits in high cost areas from $362,790 to $625,500.

The Act prevents HUD from raising single family loan fees and from raising loan fees on FHA rental housing loans.

More importantly the Act allows borrowers in jeopardy of default to refinance into more affordable government (FHA) insured loans. The program in effect insures lenders who voluntarily reduce mortgages for at-risk homeowners to at least 90% of the property's current value. This program is completely voluntary for lenders, investors loan servicers and borrowers.

The FHA approved lender will determine the size of the size of the loan the borrower can reasonably pay and that meets the requirements of the program. If the current lender agrees to the write-down the FHA will pay off the discounted existing mortgage. The resulting loan must be a 30 year fixed rate loan.

In return for the write-down of the loan the FHA will get a portion of any future profits on the home. This provision is intended to help the government recover its investment.

The VA

The VA home loan guarantee limits have been temporarily been increased to the same level as the same level as the Economic Stimulus limits through December 31, 2008.

Tax Provisions

The Act creates a $7,500 tax credit that would be available for any qualified first time home buyer between April 8, 2008 and June 30, 2009. This credit will be repayable over 15 years. It is, in essence, a 15 year interest free loan.

The Act provides taxpayers claiming the standard deduction with up to an additional $500 ($1,000 for a joint return) standard deduction for property taxes in 2008.

The Act has also heightened restrictions on the exclusion from capital gains on the sale of a primary residence under IRC section 121. For details see our article discussing this modification of Internal Revenue Code section 121.

Stabilizing Neighborhoods

The Act authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.

Provides $ 4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.

Federal Debt Limit

The Act increases the Federal debt limit to $10.6 trillion. This amounts to an $800 billion increase.

Numerous other details contained in the bill have not been covered in this article.

Contact us if you are interested in looking at available property in South Orange County. mailto:AskMikeyHall@gmail.com