The Housing and Economic Recovery Act of 2008

The Housing and Economic Recovery Act of 2008 H.R. 3221, enacted as P. A. 110-289 Presentation for Illinois Real Estate Lawyers Association September 10, 2008 Richard M. Kimball Branch Manager Allied Home Mortgage Capital Corporation 5005 Newport Dr., Ste. 402 Rolling Meadows, IL 60056 Office: 847-252-7900 Fax: 847-252-7979 Why this new law? • To help a sluggish housing market recover • To strengthen an also sluggish US economy • To provide additional benefits to current homeowners, and encourage home purchases • To help prevent more foreclosures, to avoid further weakening of home prices nationwide • To prevent “bad actors” from participating in the professional business of home loan lending Let’s Break it Down • • • • • FHA “Modernization” – several changes New Tax Credits and Incentives Conforming “Jumbo” loan changes HOPE for Homeowners in trouble New Quality Standards for Mortgage Lenders Seller-Paid Down Payment Assistance • Nehemiah, AmeriDream . . . Going, going… not gone yet, but slated to be eliminated Oct. 1, 2008 • Why? These loans said to have triple the chance of default and foreclosure over traditional FHA loans (but 9 out of 10 performing?) FHA Changes A. Down Payment Assistance B. Minimum Cash investment C. Mortgage Insurance Premiums Seller-Paid Down Payment Assistance • Bills already in progress to resuscitate, but all guarantees are off (see www.DPAgroundswell.org for information on H.R. 6694 - The FHA Seller-Financed Downpayment Reform and RiskBased Pricing Authorization Act of 2008) • BOTTOM LINE: If prospective homebuyers want Seller-Paid DPA – they must get it now! More Cash Needed Ahead • For FHA financing, minimum cash investment is increasing from 3% to 3.5% as of Oct. 1, 2008 • Mortgage Insurance costs will likely be increasing too • HUD in process of clarifying details and timing • BOTTOM LINE: Prospective home buyers should act now before changes take place! Did Someone Say Tax Credit? • A. What is it? Tax “Credit” Up to $7,500 – 10% of Sales Price up to a Maximum of $7,500 – Must be Primary Residence – Income Limits: $75K for Singles or $150K for Couples $7,500 Tax “Credit” • B. Dates effective - Good for Buyers From April 9, 2008 Through July 1, 2009 $7,500 Tax “Credit” • C. Who qualifies All First Time Home Buyers – Or Any Non-Homeowner in the Past Three Years – Phases Out at $95K and $170K Respectively The Fine Print • D. Pay Back Requirements • The Tax “Credit” is generous… but is actually an interest-free loan, must be paid back over 15 years at $500 per year • If home sold early, repayment of loan is limited to amount of appreciation • If homeowner dies… the good news is that the loan is forgiven. The bad news is… the homeowner is dead. • BOTTOM LINE: Better benefits than ever before for First Time Home Buyers to get “off the fence”, and into their first home… but limited time program. As an FYI…Tax Benefits for Current Homeowners • For whom? Those who own a home but currently file the EZ form, or do not itemize their tax deductions • Most homeowners itemize deductions – but this will help some individuals • May be able to deduct real estate property taxes, up to a maximum of $500 for a single person, $1000 for married • BOTTOM LINE: Opportunity for non-itemizing homeowners. Who You Calling “JUMBO”? • In recent times, Fannie Mae and Freddie Mac have temporarily allowed more favorable interest rates on loan amounts normally considered to be “Jumbo” • This benefit was set to expire, but has been extended • However, the maximum limits have decreased – First Capped at $417,000 – No Change – Maximum Caps Pulled back to $625,500 – Few Markets Hit Here – Capped for Others at 115% of Local Area Median • BOTTOM LINE: Opportunity for homebuyers in certain Jumbo markets to finance more affordably! HOPE for Homeowners • Who will this program impact? Homeowners who are “upside-down” in their homes, ie: owe more than the property is currently worth… and are headed for trouble • Very detailed eligibility guidelines • Must agree to split all future equity built up in the home with the government on a 50/50 basis • Foreclosed homes drag down property values for everyone… so this is good news for all homeowners • BOTTOM LINE: If you have homeowner clients who are in serious trouble, make them aware of the program … help clients while helping to keep America’s neighborhoods stronger. The Heat is On… Originators • SAFE Mortgage Licensing Act • Federal Licensing Requirements are Coming, and Will Improve the State of the Mortgage Industry Overall • No Crooks Allowed • Smarter Mortgage Professionals Ahead • Have to Be in Good Shape – Financially That Is • KEY: Partner with true professionals, who not only have experience, knowledge and ethics – but also have the tools to help ensure the transaction closes successfully. Home Buyers should act now! • Home prices are low – and many experts believe a bottom in real estate is here • • • Home loan rates still exceptionally low Benefits of this legislation will not last forever. Be sure clients get pre-approved • • Work that database Work with true professionals Richard M. Kimball Branch Manager Allied Home Mortgage Capital Corporation New Address: 5005 Newport Dr., Ste. 402, Rolling Meadows, IL 60056 Office: 847-252-7900 Fax: 847-252-7979