Relief on the way�.Help for Buyers AND Sellers

Posted at 4:10 AM, Sep. 20, 2007

With the Fed’s action to reduce interest rates by ½ percent, there is hope that there is an answer to the current crisis affecting many prospective home buyers, homeowners hoping to refinance into more affordable mortgages, those interested in getting home equity lines of credit, and, homeowners facing foreclosure.

Be aware, however, that the Fed’s rate cut of ½ per cent does not necessarily equate to a ½ per cent decrease in mortgage interest rates but these Fed cuts usually do put pressure on rates bringing them down incrementally. In fact, mortgage rates have already been dropping over the last several weeks, perhaps in anticipation of the Fed’s actions.

The new FHASecure program proposed by the Bush administration, which allows FHA to guarantee refinance loans for delinquent borrowers facing interest-rate resets, and risk-based pricing, will allow the FHA to assist up to 700,000 borrowers in the next two years or 240,000 in the remainder of the fiscal year.

As FHA Reforms move forward, if the House and Senate can come to agreement, more buyers can enter the market with no down payment. Under existing FHA guidelines buyers must make a minimum 3% down payment.

The Bush administration says it supports boosting FHA loan limits from $362,000 in high-cost areas to $417,000 and from $200,000 in lower-cost areas to $271,000. Allowing the FHA to back bigger loans would detract from its mission of serving low- and moderate-income families, the administration maintains.

The impact of these changes which will get more buyers into the market can help sellers whose homes are staying on the market because of a diminishing pool of qualified buyers.