President Bush Sign HR 3221 -

President Bush has signed H.R. 3221, the Housing and Economic Recovery Act of 2008. This will assist an estimated 400,000 homeowners facing foreclosure by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas. The bill permanently increases the conforming loan limit to $625,500. In February, the Economic Stimulus Act of 2008 was signed, temporarily raising the conforming loan limit in high-cost areas to $729,750 from $417,000 until December 31, 2008. The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area’s median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area’s median home price, up to $625,500. Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008. Provisions of the legislation include: • A temporary increase in mortgage revenue bonds to refinance subprime mortgages. • New regulator for Government Sponsored Enterprises to restore investor confidence in GSE loans and help the market and economy stabilize. • First-time home buyer tax credit, which allows first-time home buyers to receive a tax refund worth up to 10 percent of a home’s purchase price, up to a maximum of $7,500. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years. • Temporary raise in the loan limit for the Veterans Affairs home loan guarantee program to the same level as the economic stimulus limits until the end of 2008. • Adjustment to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), allowing sellers to provide the non-foreign affidavit to a qualified closing entity and not just the buyer. • The setting of minimum requirements for mortgage originators, which mandates fingerprinting of loan originators and establishes a nationwide loan originator licensing and registration system. The requirements do not apply to those only performing real estate brokerage activities unless they are compensated by a lender, mortgage broker, or other loan originator. States will have the ability to implement more stringent laws. • The creation of a National Affordable Housing Trust Fund to help cover the cost of the FHA rescue plan for the first five years and develop affordable housing in subsequent years. • The Treasury Department’s proposal to create a federal backstop program to ensure the financial well-being of Fannie Mae and Freddie Mac. • The FHA’s inability to insure loans that utilize a seller-funded down-payment assistance program. Down-payment assistance from family, employers and other nonprofits is still allowed. • The Community Development Block Grant Programs’ $4 billion allotment for communities to purchase and refurbish foreclosed homes

Positive News for a Change in the Housing Market

U.S. home sales contracts signed in June unexpectedly rose, boosting an index of pending sales to the highest level since October, though it was well below the year-ago level, a real estate trade group said on Thursday.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in June, was up 5.3 percent to 89.0 from a downwardly revised 84.5 in May.
It was the highest reading for the index since October, when it was at 89.8.
Some analysts said the main reason for the June improvement might be that banks were aggressively marking down prices on foreclosed properties to get them off their books. But even that is a sign that housing markets are being brought into order.
"There are some bottom feeders coming in to buy some of these homes in distressed situations," said Andrew Richman, managing director for SunTrust's personal asset management division in West Palm Beach, Fla.
The pickup in June signings sharply contrasted with forecasts by economists polled by Reuters who had expected contract signings to decline 1 percent.
Video: CNBC's Diana Olick breaks down the housing numbers.
The association's senior economist, Lawrence Yun, said the swing in monthly signings "indicates a housing market in transition," but said it nonetheless was encouraging.

Georgia Dreaming and Nehemiah Scheming

So let’s assume that FHA will pull the plug on seller-assisted down payment assistance (Nehemiah and AmeriDream) at the end of September… There is some chance that a new Bill (H.R. 6694) being studied by the House of Representatives will revive the program, but I would be surprised if they can overturn the recently passed (H.R. 3221) legislation before they have time to see the debacle that 3221 will produce. (I’m afraid it will take until this time next year for FHA to come to its senses and reduce the down payment requirement.)

What will be left for prospective buyers that don’t have 3.5% to put down towards purchasing a home when the FHA changes come about October 1st? Georgia Dream, offered by the Department of Community Affairs (DCA), is the next best bet for those that qualify. It is typically an FHA loan with a $500 minimum cash investment on the part of the borrower. The down payment comes in the form of an interest-free second mortgage for $5,000 or $7,500, depending on the applicant’s job type, with income restrictions. The second mortgage would have to be paid back down the road when the property is sold. There are even higher second mortgage amounts available for service men or women ($10,000) and applicants with special circumstances, such as disabilities.

The income limitations for the interest free second mortgage are based on the size of the family that will live in the house. In metro-Atlanta, here is what the income limitations look like: 1 person family: cannot make more than $39,850, 2 person family: 45,550, 3: 51,250, 4: 59,950, 5: 61,500, 6: 66,050, 7: 70,650, 8 or more: 75,200. Counties outside of metro-Atlanta range from a low of $30,400 maximum income for 1 person households to a high of about $57,350.

The Georgia Dream loan (or DCA) can either be a conventional or an FHA loan… The maximum sales price is $250,000. For the FHA version, the seller can pay closing costs and prepaids up to 6% of the sales price. The conventional version limits what the seller can pay to 3%. So FHA will be the preferred method, primarily for that reason.

DCA loan applicants must complete a HUD-approved counseling course to qualify and must be a first-time homebuyer or cannot have owned a home in the past three years unless the home they want to purchase is in a targeted area, as determined by DCA. The applicant cannot have more than $20,000 in liquid assets after closing (or 20% of the sales price). For more information on this program, call your friendly loan officer.

H.R. 6694: If you are a proponent of seller-assisted down payment assistance and would like to express your support for the bill that could save it, please visit the following website: http://www.getdownpayment.com/pdfs/hr6694.pdf to view a copy of the proposed Bill. The Nehemiah organization urges you to contact your U.S. Senators and House of Representatives and make your feelings known. Comments (pro or con) can be submitted by visiting the following website: http://www.capwiz.com/nehemia/issues/alert/alertid=11709431.

Without the repeal or modification of H.R. 3221, DPA will end on October 1st. Like the website says, “legislation that bans down payment assistance on October 1, 2008 will have a negative impact on our already struggling housing market and devastate local economies.”

How many times do we have to say it?