President Bush has favored stricter guidelines for the mortgage lending business and up until Wednesday he has threatened to veto a bill that would hand $3.9 billion to local governments as a bailout. As of Wednesday however, it is speculated that he will sign the “multi-use” legislation and the senate will likely pass on it as well.Treasury secretary Henry Paulson commented that it was easy to advise President Bush to sign this rescue package because he felt it necessary to “stabilize the troubled housing and credit markets.” As a result, the House voted 272-152 and it is expected to become law quite soon as heavy speculation agrees that both Senate and Bush will approve.
Key Highlights of Legislation
- FHA Changes
- Mortgage limits for high cost area increased to $625,000 from $417,000
- Cash Down payment is set at 3.5%
- Seller Down Payment Assistance will be terminated on September 30
- Rescue fund for special refinance programs into FHA fixed rate products
- Fannie Mae and Freddie Mac
- Temporary powers to provide liquidity and capital
- Treasury to offer unlimited line of credit to Fannie and Freddie over the next 18 months
- Treasury has authority to buy stock in companies if necessary
- First time Home buyer credits
- Tax refund incentives for first time home buyer up to 10% of purchase price not to exceed $7,500
- Grants for States
- Grants totaling about $3.9 billion to buy and rehabilitated foreclosed properties
How does this help you?
The bill is primarily focused on helping troubled “at-risk” homeowners as well as injecting capital and supporting the two major government sponsored enterprises - Fannie Mae and Freddie Mac. This is good news for California residents as the FHA changes will support mortgage limits which are needed for our above average median home prices. In addition, the bill itself will specifically aim to refinance “at-risk” borrowers into new fixed-rate FHA loans. First-time home buyers should speak to their local mortgage consultant to see if they will qualify for the new tax-refund incentive worth up to $7,500.
Sources: NYT,CNN Money
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About time they did away with seller-financed down payments in FHA. And the $7500 incentive should get first-timers off the fence and into the market.
Do you have any insight into why they might not want to pass the bill?
Yeah, this rescue is not being welcomed by everybody. In fact, a lot of consumers are throwing a fit saying they should not be responsible for having to bailout the ones who took out these irresponsible loans.
As for the seller-financed down payment, I just wrote an article that address this issue and you can find it here.