Action on legislation expected soon.
Calling the legislation the American Housing Rescue and Foreclosure Prevention Act of 2008, (H.R. 3221) contains a provision that would provide a temporary, first-time home buyer tax credit of $8,000 for the purchase of any home used as a principal residence and closed on between April 9, 2008 and April 1, 2009. In 1975 there was a similar situation in the housing market with a huge supply of new and unoccupied homes. The $2,000 tax credit then was a major stimulus that reduced housing inventory by about 60%. The overriding theme is to overcome the situation where one has to sell their existing home before buying another. With a larger pool of first-time buyers in the market, many could move up the housing chain.
The legislation is designed to help struggling home owners, jump-start the housing market, save jobs and restore consumer confidence. Consumers are finding home at local markets like http://www.OCPropertyLink.com
The legislation would allow the Federal Housing Administration to guarantee up to $300 billion in new loans to help at-risk homeowners refinance into more affordable mortgages. In exchange for evading the foreclosures, lenders would be forced to reduce the loan’s value to 85% of the balance.
“Helping people to avoid foreclosure and stay in their homes is a worthy goal”, Richard Dugas, Pulte Home CEO said, “but that alone will not stimulate home purchases. And without home buyers, housing prices keep sinking, leaving more and more Americans wondering how low they can go — and therefore, more antsy about purchasing cars, furniture and other products”.
Whether you are a home owner, renter or potential home buyer, the housing stimulus bill will likely affect you.
The National Association of Home Builders highlights some of the provisions:
Temporary home buyer tax credit.
For first-time home buyers, a tax credit will reduce taxable income the first year after buying a home and will help provide a bigger refund or a lower tax bill.
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With this incentive, many home buyers who have been sitting on the fence will dive into the market. Homes sitting on the market will sell, home sellers will buy new homes, demand will increase, and home prices will stabilize. Stable home prices allow existing home owners to refinance if needed or sell their home without taking a loss on their biggest investment.
FHA modernization.
The Federal Housing Administration (FHA), an agency of the federal government, helps borrowers with less-than-ideal credit ratings or limited down payment cash get affordable mortgages. As the program stands now, taxpayers could end up paying some of the costs of the program’s outdated systems and procedures.
The pending bill will increase limits on FHA-approved loans to match current home prices and allow the agency to insure more homes in high-cost markets. It also includes a new FHA foreclosure prevention program to provide new loan guarantees to help as many as 400,000 at-risk borrowers stay in their homes.
GSE reform.
Freddie Mac and Fannie Mae are government-sponsored enterprises (GSEs) that buy mortgages from lenders; giving them the cash needed to make more loans to home buyers. Changing the way they are regulated will enable them to offer more loan programs and make more funds available for home purchases or to refinance troubled loans to be available to home buyers and owners.
Mortgage revenue bond program.
Foreclosures, which are making the news headlines every day, can be lessened with the expansion of the mortgage revenue bond program. This will help low- and moderate-income families and individuals finance the purchase, rehabilitation or improvement of single-family residences, which will mean that fewer homes will go into foreclosure. It will also provide more mortgages for first-time home buyers.
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