New Housing Rescue Bill Summary

The "American Housing Rescue and Foreclosure Prevention Act of 2008" (H.R. 3221) was signed by President Bush on July 30, 2008. This measure provides mechanisms to help the troubled housing market as well as tighten lending practices and reform financial institutions. New Homebuyer Tax Credit - For qualifying home purchases after April 11, 2008 and before July 1, 2009, the Act provides eligible first-time homebuyers a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately). The credit phases out for individual taxpayers with modified adjusted gross income between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of the purchase. A taxpayer is considered a first-time homebuyer if he (or spouse, if married) had no ownership interest in a principal residence during the 3 year period before the purchase of the home to which the credit applies. Reduced Principal Residence Exclusion for Non-qualified Use Periods - For sales after December 31, 2008, the principal residence exclusion will not apply to the extent gain is allocable to non-qualified use. Non-qualified use includes a period during which the residence is not used as a principal residence by the taxpayer or spouse. In general, the seller will be required to reduce the exclusion amount by a ratio the numerator of which is the period of non-qualified use and the denominator of which is the period the property was owned. Certain periods of non-qualified use are not counted including any period before January 1, 2009, any non-qualified use arising after a period of qualified use, and certain temporary absences. This new rule will further limit the ability of an investor/owner to convert an investment property into a principal residence and qualify for the full Section 121 exclusion. Government Sponsored Enterprise (GSE) Reform – This provision creates an independent regulator to oversee the GSEs and increases conforming loan limits to the greater of $417,000 or 115% local area median home price (capped at $625,500). The increased loan limits will be applicable to loans originated after December 31, 2008. Federal Housing Administration (FHA) Reform – Increases permanent FHA loan limits to the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlines processing for FHA condos; reforms the Home Equity Conversion Mortgage (HECM) program and the FHA manufactured housing program. The down payment requirement on FHA loans will go up to 3.5% (from 3%). The effective date is immediate upon enactment, but the new loan limits will be effective on December 31, 2008. FHA Foreclosure Rescue – Develops a refinance program for homebuyers with problematic subprime loans. Lenders who elect to participate will write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. This program is effective on October 1, 2008. Seller-Funded Down Payment Assistance – This codifies an existing FHA proposal to prohibit the use of down payment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by non-profits funded by other sources, churches, employers, or family members. This prohibition is effective on October 1, 2008. Veterans Affairs (VA) Loan Limits – Temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008. Risk-Based Pricing – Puts a one year moratorium on the Federal Housing Authority using risk-based pricing. This provision is effective from October 1, 2008 through September 30, 2009. GSE Stabilization – Authorizes the Treasury to, make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae will not fail. Mortgage Revenue Bond Authority – Authorizes $10 billion in mortgage revenue bonds to refinance subprime mortgages. National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of defaulted loans in FHA foreclosure program. In later years, the Trust Fund will be used for the development of affordable housing. Community Development Block Grant (CDBG) Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes. Low Income Housing Tax Credit – Changes the Low Income Housing Tax Credit program to make it more efficient. Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system and requires a parallel HUD system for states that fail to participate. Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. I look forward to helping you sell more real estate.

Realtors Join in Building Homes for Heroes

Realtors Join in Building Homes for Heroes by Bob Hunt There were no dry eyes today at the celebration/ceremony marking the raising of the walls of the first four homes in Habitat for Humanity's "Homes for Heroes and Foundation for Families" neighborhood in San Juan Capistrano. Homes for Heroes is a pilot project for Habitat. Fourteen of the 27 homes to be built on a 2.7 acre site here will be marketed both to combat-disabled veterans and their families and to the surviving families of deceased veterans. It is anticipated that this program will be continued throughout other parts of the country. Habitat for Humanity is widely known for its philosophy of "providing a hand up, not a handout." Families are selected to purchase Habitat for Humanity homes based upon need, good credit, household income (which must fall between 25 – 80 percent of the area's median income), legal residency in the U.S., ability to make a 1 percent down payment and to repay a long-term mortgage, and a commitment to partner with Habitat. Once a family is selected, they attend classes on home ownership, budgeting, and home maintenance. They work with a "family partner" who provides guidance and support. And, most notably, they donate 500 hours of "sweat equity" either building their own home or helping another family build theirs. In the case of the San Juan Capistrano project, families of Marines stationed at nearby Camp Pendleton were encouraged to apply. (Currently, the Orange County branch of Habitat is processing over 200 applications and inquiries.) At today's ceremony, seven of the families who will live in the eight homes in Phase One were introduced. Two of them were families of active duty Marines. One Marine, a single dad, could not be there. His duty today was to escort home the body of a fallen comrade. Today's wall-raising event was preceded by the participation last week of approximately 400 Marines and Sailors from Camp Pendleton. About 100 a day worked for four days building frames, digging trenches, and laying irrigation lines. They worked so hard, so fast, and so efficiently, that they were asked to move on to another project before the four days were up. They had done a projected four day's work in about two. Members of Combat Logistics Regiment 15, most of them are preparing to deploy to Iraq. The Homes for Heroes project particularly resonated with local Realtors®. Three nearby associations – Orange County Association of Realtors®, Newport Beach Association of Realtors®, and Laguna Board of Realtors® -- committed to raise $250,000, an amount sufficient to build one home. Their efforts, to put it simply, were just phenomenal. Individual Realtors®, brokerage offices, Women's Council of Realtors®, association staff members, affiliates such as lenders, home warranty reps, and sign companies all pitched in. They held events (one Realtor®, Michael Gosselin of Laguna Beach, even sponsored a "non event" that raised $19,000), they recycled, they auctioned, they sponsored luncheons and drawings, and they wrote checks. Need I remind anyone that when all this was going on, the market had already turned? Down, that is. The last year and one-half has not been fat times for Orange County Realtors®. This past month, the Realtor® associations topped their goal of $250,000. Excess funds will be used to help furnish one of the homes for heroes. Having raised the requisite money, today scores of Realtors®, association staff, and affiliates were on site swinging hammers and raising the walls of homes that will introduce deserving, well-chosen families to the American Dream. Don Readinger, president of the Orange County Association of Realtors®, and himself a Navy veteran, begins his public addresses by stating, "I'm proud to be a Realtor®." Anyone who attended today's ceremony in San Juan Capistrano would have been proud to say that with him. Copyright © 2008 Realty Times. All Rights Reserved.