The House of Representatives has passed the nearly 700 page Housing Reform Bill and the US Senate is expected to vote on it by Wednesday. President Bush has dropped his threat to veto the reform package thereby clearing the way for the legislation to be finalized.
Here is a quick synopsis
1. Increase the Federal Housing Administration's role. The FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes. Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home. The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - would be funded by fees from Fannie and Freddie.
2. Create a stronger regulator for the GSEs: The new regulator will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.
3. Permanently increase "conforming loan" limits: The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,000 from $417,000.
4. Increase FHA maximum loan limits for high-cost areas to $625,000.Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.
5. Create home buyer credit: The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments by the buyer. The refund would be reduced gradually for single filers with adjusted gross incomes above $75,000; and for joint filers with AGIs over $150,000.
6. Bar down-payment assistance for FHA loans: The bill eliminates a program that has allowed sellers to provide down payment assistance. The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.
7. The bill would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.
Paul Moye, your Middle Tennessee Real Estate Agent www.middletnrealty.com
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