Congress passed a housing bill this past weekend and it was signed into law on Wednesday by President Bush. The new law will make many needed changes. It will provide mortgage relief for more than 400,000 US homeowners facing foreclosure. The law will also provide $300bn in federal guarantees to help refinance problem mortgages and will also assist US mortgage giants Fannie Mae and Freddie Mac.
Although there are some very good things in the bill there is one major item that will affect many new Homeowners. This bill will totally eliminate down payment assistance as of Sep 30 2008.
With that said several people in Congress have pledged to do everything the can to keep these programs. It’s estimated that the down payment assistance programs have helped over 700,000 Americans purchase a home. Many consumers would not be able to get a Home Loan without down payment assistance. Company’s like The Mortgage Bank of Arkansas http://www.themortgagebankar.com use DPA with a large part of their home loans.
There is still some time but to be safe borrowers seeking home loans that need to be combined with DPA need to act fast. The new law will require that they come up with a minimum of 3.5% for down payment. Many Mortgage Lenders http://www.themortgagebankar.com forced to seek out customers who have the money for the 3.5% down payment
Here are the major components:
1. FHA Changes
Mortgage limits for high cost areas will be increased to $625,000 on a permanent basis (115% of the current conforming limit).
The FHA floor will go from 48% to 65% of the current conforming limit. This will put the new permanent floor at $271,000.
Cash down payment is set at 3.5%.
The seller funded down payment assistance program (DPA) will be terminated on September 30.
The risk based premium established by HUD last week will be suspended on September 30. The ceiling on upfront premiums will go to 3%.
2. Fannie and Freddie
The conforming loan limit will be increased to 115% of area median up to $625,000.The bill provides for a federal "backstop" for Fannie and Freddie which allows the Treasury to capitalize the companies by taking an equity stake.
A new regulator with enhanced powers is created.
The bill creates an affordable housing trust fund paid for by assessments on Fannie and Freddie to help prevent foreclosures and facilitate affordable housing
3. FHA Rescue Fund
The bill creates a special FHA refinance program designed to allow the refinance into fixed rate FHA products of up to $300 billion in distressed mortgages.
4. Licensing
Encourages a nation wide licensing and registry system for loan originators by setting minimum qualifications and assigning responsibility to HUD for establishing new rules for those states that do not enact licensing laws.
5. Redevelopment of Foreclosed Properties
Provides $4 billion in funds for local governments to purchase and redevelop foreclosed properties.
6. Tax Incentives
Establishes a range of housing incentives, including a first time homebuyer tax credit and expands the Low Income Housing Tax Credit.
