The Housing and Economic Recovery Act : Rooftop Views

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The Housing and Economic Recovery Act

President Bush recently signed the "Housing and Economic Recovery Act of 2008" into law. This $300 Billion rescue plan is aimed at helping struggling homeowners avoid foreclosure, as well as boost confidence in the housing market. Although the bill is several hundred pages long and contains a number of far-reaching provisions, here are a few of the major provisions in the legislation that impact homeowners and homebuyers:

1. Tax credits. First-time homebuyers who purchase their primary residence on or after April 9, 2008 and before July 1, 2009 are eligible for up to $7,500 in tax credit, provided they haven't owned a home in the last three years and fit certain income parameters. The credit is generous, but it is actually an interest free loan, paid back over 15 years at $500 per year when taxes are filed.

Special note: Some types of seller-paid down payment assistance programs are being eliminated as of October 1st as well - so purchasing a home before then may gain you a double benefit of tax credits AND seller-paid down payment assistance while it is still available.

2. Larger loans at lower rates. There have recently been provisions in place that have allowed loans larger than $417,000 to qualify for better financing rates than normally would be available for "jumbo" loan amounts of that size, thanks to Fannie Mae and Freddie Mac. Although these provisions were set to expire, they are being extended...however, the top end of the loan size that will be allowed under these programs will be dropping down from $729,750 to $625,500 as of January 1, 2009.

3. FHA Hope for Homeowners. This provision is designed to help homeowners who are "upside down" on their mortgages--that is, they owe more on their house than they can sell it for in today's market. Essentially, this plan allows homeowners who meet the requirements and are upside down to refinance their mortgage to a new 30-year Fixed FHA mortgage. There are a number of qualifying details that must be met and requirements to be agreed to -- including agreeing to split the equity in your home with the government in the future. Still, if you're upside down on your mortgage and struggling in today's economy, this is an option worth exploring in more detail.

2:00 PM - Aug. 28, 2008 - comments {1} - post comment

RE: The Housing and Economic Recovery Act

Thanks for the explanation. I have been trying to have this explained by FHA authorized lenders in town but it seems at this point they don't know any more than I do.

For example: A house was bought in 05 for 255K, the seller took back 38K as a second. The house is worth today about 130K tops. If the house can be refinanced to 90% of MV, where does the rest go? What happens to the private seller carry back second? I am probably right by saying the balance gets written off by the bank and in the end we are all going to pay for it. Does anybody know?

Also, let's say a homeowner simply couldn't hack it anymore and as a last resort to help him make payments the home is rented out. Now the owner is still 1K short ea. month but is making the payments. For how long who knows because moving out also triggers higher property taxes and insurance. Can this owner still do the refi (assuming all other provisions are met)? People do make these decisions because they hope to do the right thing which is to make the payments if possible.

Margaret Amador - 7:17 AM - Sep. 2, 2008