H.R. 3221 - A Simple Guide

More good news in the real estate market. President Bush had threatened to veto bill H.R. 3221, but changed his position at the 11th hour. The law was passed and will help many buyers and sellers in today's market.

 Increased loan amounts for FHA and conforming loans — this may not directly benefit the majority of our local area market as basically it will facilitate lower down-payment and more cost-efficient loan programs for higher-priced homes. This should stimulate the ability of buyers to purchase entry-level homes in more expensive markets (such as San Diego), which in turn will enable those sellers to sell homes here in California.

 Reforms to the HECM program — further regulates Home Equity Conversion Mortgages (“reverse mortgages”) to provide even more protection to those who can benefit from them. Used properly, these wonderful and versatile financial tools can help people over 62 years old protect their independence and even purchase homes which better suit their retirement needs.

 FHA Foreclosure Rescue — probably the most publicized feature, and now we know the details (strings attached). This provision may help homeowners who:

1. It the owner cannot afford their current loan which originated prior to January 1, 2008
2. If the owner pays more than 31% of their income toward their mortgage
3. If they have not intentionally missed mortgage payments, and do not own a second home.

Hope for Homeowners may assist by re-financing with a 30-year, fixed rate FHA loan at 90% of the current property value. In many cases this reduces the principal and thus the monthly payment.

The trade-off
1. the homeowner must be able to qualify for the new loan amount
2. the current lenders must agree to write down their existing principal balance
3. there are limitations to drawing future equity from the property, and borrowers agree to share 50% of all future appreciation with FHA

 Home buyer Tax Credit — home buyers who purchase between 4-8-08 and 6-30-09 may qualify for a tax credit up to $7500 . The buyer must not have owned another home within the preceding three years, and may be subject to income qualifications. The government will recapture the credit over 15 years (approximately $500 annually) so it is really more like a loan with 0% interest.

 Down payment requirements — The down payment requirement for FHA loans will increase to 3.5% after 12-31-08. If you need a seller-funded down payment assistance program, we have 2 months to make it happen.

Full details of may be found on-line at www.fha.gov (which is an excellent source for additional information how to prevent foreclosure and other housing or financing questions).

A good summary and explanation of H.R. 3221 is available at http://www.realtor.org/gapublic.nsf/pages/hr_3221_key_provisions?OpenDocument

and of course, you should always consult with your attorney and tax preparer/financial planner to ask how the “Housing and Economic Recovery Act of 2008” will affect you.

If you know anyone that is considering taking advantage of the opportunity to purchase a home in this fantastic buyer's market, please have them call me —