President signs new housing act to help 400,000 homeowners

The president has just signed the Federal Housing and recovery Act of 2008. Legislation that will overhaul the Depression-era FHA and provide mortgage relief for 400,000 homeowners struggling with foreclosure woes.

This bill is also designed to quiet the jitters on Wall Street by offering some financial relief and additional accountability for the troubled, government-sponsored mortgage companies Fannie Mae and Freddie Mac.

While the bill started with a battle between the White House and the Democrats in Congress, bi-partisan support eventually led the President to withdraw his veto threat. Below are some highlights of this far reaching legislation.

Homeowner Relief Measures (Hope for Homeowners Act of 2008)

• The law creates a new program to back FHA-Insured mortgages for debt-laden homeowners. Up to $300 billion will be available through the voluntary program operated by a board consisting of the HUD and treasury secretaries, and a chairman of the Federal Reserve Board and the Federal Deposit Insurance Corporation. (FDIC)

• In exchange for new mortgages, homeowners will share future appreciation with the FHA. Borrowers must also meet a payment burden test to determine if they can afford a new mortgage.

• Banks must agree to relinquish their claims for a payment equal to 85% of the current value of the home.

• The homeowner relief program begins Oct. 1^st 2008 and ends on Sept. 30^th 2011.

New regulator for FHA

• The law creates a new, independent regulator called the Federal Housing Finance Agency to govern GSE’s (government sponsored enterprises). It will oversee Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

• The Treasury Department has been granted temporary authority to purchase debt and equity of Fannie Mae and Freddie Mac through 2009 to provide financial stability for the mortgage giants.

Modernization of FHA

• The law increases the FHA loan limit to 115% of area median home price with a cap at $625,000.

• Down payments of 3.5% will be required for any FHA loan

• Seller assisted down payment programs (such as Nehemiah) will end October 1^st

• The FHA mortgage insurance premium will increase to 3%.

• The FHA’s program for reverse mortgages is expanded with higher mortgage limits.

Tax Credits

• Provides new first-time home buyer tax credit which is equivalent to an interest free loan of 10% of the purchase price of the home (up to $7500) to be repaid over the course of 15 years. It will be available through July 2009 for taxpayers who meet adjusted gross income levels.

• Rules relating to the Low Income Housing Tax Credit will be simplified and states will see increased housing tax credit in 2008 and 2009 depending upon the size of the state.

• Allows a new standard deduction for homeowners who do not itemize on their tax returns.

Other Provisions

• The bill lengthens the time a lender must wait before starting foreclosure after a sooldier returns from service (from 3 to 9 months) and also provides returning soldiers with one year of relief from increases in mortgage interest rates.

• Enhances mortgage disclosures requirements to require lenders to inform borrowers of the maximum monthly payments possible under their loans.

• Provides additional funding for housing counseling and legal services to distressed borrowers.

• 44 billion will be provided for emergency Community Development Block Grant money to purchase and clean up abandon homes in areas blighted by foreclosures.

Source www.banking.senate.gov/public/_files

• These 29 Tips To Help Save You Money Funny how when we look at money, financial affairs and wealth we often overlook some of the most simple things. For example what about cutting back on items or finding ways to save on the purchases of the items or services, I read this article in Readers Digest a couple......
• Snowball your way to financial freedom Debt is like a plague that eats your hard earned money faster than you can earn it. You work for your bills and your bills take everything you work for. Soon it becomes a stressful vicious cycle that makes people bitter and angry. Your outlook becomes bleak; you see no......
• E-Waste Plus Wall Street, Times The Mortgage Market Equate To A Toxic Mess E Waste, mortgages, Wall Street, credit derivatives, rising credit deficit and the bet against America. I was watching 60 Minutes last night, it was very disturbing to learn exactly what has been going on both in the technology sector as well as the financial markets. Both topics showed me......
• Has the sky fallen for victims of financial distress needing bankruptcy bailouts? It is true that bankruptcy laws have changed in recent years 2005 to be exact; these new laws make it difficult for some filers to obtain a chapter 7 bankruptcy. Yet congress has not eliminated bankruptcy for the little guy they have made the debt elimination of a chapter 7......
• Staying Cheerful with the Credit Crunch Businesses and consumers alike can’t keep their lines of credit from shriveling up to nil with the belt tightening across all financial markets. However there are things to be done when the going gets tough. First rule of engagement get going it sounds silly but true when it gets......

• Dale Siegel Shares the New Rules for Mortgages I was recently fortunate enough to have the opportunity to interview Dale Siegel, author of The New Rules for Mortgages. We exchanged emails in a Q&A format on the subject of mortgages, the housing market, etc. Here are her responses to my questions. Lending Guidelines Frugal Dad: Lenders used to......
• Tips for Paying Off Student Loans Right now, the student loan industry is going through one of its worst periods in decades. New Federal regulations have forced many banks to stop offering student loans, and students are being forced to either find a direct loan or start paying back what they owe. Enrollment figures are being......
• Budget 2009: Tax boost for infra loans? The video is available on the NDTV site..The proposal I did like was that Infrastructure related investments of upto INR 5 Lakhs ( USD 10000) from any individual/family/corporate would lead to 100% tax benefits. That would really help, Mr Finance Minister. And believe me, I mean the Infrastructure case and......
• Mortgage Home Possessions Continue to Rise The last two quarters of 2008 have seen a steady increase in the number of mortgage possession orders reaching the county courts, and this is according to data and statistics that have been released by the UK's Ministry of Justice. In England and Wales, there have been a total sum......
• Boomer and Retiree Downsizing on the Extended First Time Homebuyer Credit Congress has extended and expanded the first-time home buyer credit in several important respects. The new law will provide financial assistance to baby boomers and retirees who want to downsize to a different home. Let's discuss a few of the aspects of the credit that will aid in the downsizing......

Tagged with: loan modification • new housing bill • october housing bill • President signs new housing bill • purchase real estate • real estate

Filed under: Uncategorized

Like this post? Subscribe to my RSS feed and get loads more!

Possibly related posts