Update : Monday 7/28/2008
At long last the Omnibus Housing Bill has been approved by both the House and the Senate and should be on the President’s desk today. It is probable to be signed into law before mid-week. Below is a refined list of key provisions you should be aware.
1. Raises FHA required investment to 3.5 percent from current 3 percent.
2. Abolishes seller funded down payment assistance on FHA loans that are not credit approved by September 30, 2008. ( i.e. Ameridream, Etc.)
3. Abolishes FHA risk based MIP pricing for case numbers ordered on or after October 1, 2008.
4. Gives FHA the ability to greatly streamline FHA condo approval provisions.
5. Provides $7500 tax credit for qualified first time homebuyers on homes purchased between April 9, 2008 and July 1, 2009
6. Upon expiration of the temporary loan limits that were put in place earlier this year under the Economic Stimulus Act: (1) the Fannie/Freddie floor will remain at $417,000 and the FHA floor will remain at $271,050 (2) the Fannie/Freddie and FHA loan limit in higher cost areas will be the lower of 115% of area median home price or a cap of 150% of the Fannie/Freddie floor which calculates to a $625,500 cap.
The applicable aspects of this are the widest reaching housing legislation passed in recent memory. We should have more clarification and confirmation later in the week.
If this bill passes the Senate there will be a $7500 tax credit for first time home buyers in the WIlliamsburg, James City, New Kent, York, Gloucester County areas.
Stay tuned for a blog posting later this week when it passes the Senate !
Approved by the House on Wednesday the housing bill would provide tax credits of up to $7,500 for first-time home buyers and help an estimated 400,000 strapped homeowners avoid foreclosure.
The measure also would prop up troubled mortgage giants Fannie Mae and Freddie Mac, by giving the Treasury Department the ability to extend them an unlimited line of credit and buy up some of their stock, if necessary. The two companies back or own nearly half of the nation’s mortgage debt.
Hours before the vote, President Bush dropped his opposition to a provision offering $3.9 billion in block grants to help local communities devastated by foreclosures. With the White House’s support, the bill is likely to pass the Senate and become law this week.
A spokeswoman for Milwaukee Mayor Tom Barrett said the city intends to apply for some of the block grant money.
The 272-152 vote reflected a congressional push to send election-year help to struggling borrowers and to reassure nervous financial markets about the health of Fannie Mae and Freddie Mac.
The bill includes a program to help financially distressed homeowners refinance mortgages under better terms, by encouraging lenders to voluntarily restructure those mortgages. Lenders would agree to take less, and borrowers would agree to split any profits from the eventual sale of their home with the government. Borrowers could not get a second mortgage for five years.
The Congressional Budget Office estimates the program would cover about 400,000 homeowners with mortgages totaling $68 billion.
The bill also would include:
–A $7,500 tax credit for first-time home buyers. The centerpiece of the bill to help stimulate housing and the economy is a temporary, The tax credit can be used for any home purchased between April 9, 2008 and July 1, 2009. It is expected to spur home sales, eliminate excess inventory and bring otherwise qualified home buyers back into the market.
–A $500 to $1,000 deduction for 2008 property taxes for people who don’t itemize deductions on their tax returns.
–Higher limits, up to $625,000, on mortgages insured through Fannie and Freddie. A temporary limit of $729,750 until Dec. 31 would remain in place.
The backing for Fannie and Freddie is “a massively important provision” because it will help to restore confidence to the mortgage market, which has been buffeted by a large number of defaults, said Joe Murray, director of political and government affairs for Wisconsin Realtors Association in Madison.
Congressional analysts estimate that a rescue of the mortgage giants could cost $25 billion, and perhaps more, but they predict there is a better than even chance it will not be needed.
Murray said the other parts of the bill aimed at providing direct help for homeowners and potential buyers also will help the market.
Details of how the $3.9 billion in block grants would be distributed were not immediately available, but the city of Milwaukee already is planning how to use the money, said Eileen Force, press secretary for Mayor Barrett. Barrett was out of town on a family vacation Wednesday.
Among the city’s objectives for the money would be increasing the percentage of foreclosed properties that are sustained as primary residences, reducing the share of evictions that are foreclosure-related, and lowering the number of vacant properties, Force said in an e-mail.
U.S. Rep. Gwen Moore (D-Wis.), who represents Milwaukee, said she was pleased with the bill.
“The legislation provides the tools necessary to our local governments to address the blight of widespread foreclosure (and) it also gives working and low-income families access to affordable and sustainable housing,” she said in a statement.
But U.S. Rep. Paul Ryan (R-Wis.), whose district includes southern parts of Milwaukee County, voted against the measure, saying he objected to its provisions to stabilize Fannie and Freddie.
“This bailout plan aggravates the fundamental problem that led us here: Fannie and Freddie remain for-profit corporations but still enjoy a federal guarantee at the taxpayers’ expense against any risk of loss,” he said in a statement. “To force Americans already struggling to make ends meet to take on this risk is a dangerous precedent.”
Wisconsin’s delegation voted along party lines, with Democrats Moore, Tammy Baldwin, Steve Kagen, Ron Kind and David Obey voting in support, and Republicans Ryan, Tom Petri and Jim Sensenbrenner opposed.
In all, 45 House Republicans voted in favor of the bill.
The legislation gives Treasury Secretary Henry Paulson power to inject capital into Fannie and Freddie and provides for a federal agency to insure refinanced home loans. Paulson overcame opposition to the bill within his own party, such as that expressed by Ryan.
Democrats were more supportive.
“This is the most important piece of housing legislation in a generation,” Senate Banking Committee Chairman Christopher Dodd (D-Conn.) told reporters in Washington.
Senate Majority Leader Harry Reid (D-Nev.) said earlier he aimed to get it through the Senate by the end of the day. The bill is “a very good piece of legislation,” he said. Sen. Jim DeMint (R-S.C.) threatened to delay that schedule if he can’t amend the legislation, his spokesman Wesley Denton said.
Rep. Barney Frank , helped steer the bill after backing Paulson’s call for the emergency measures for Fannie and Freddie, which would last through 2009.
Lawmakers, intent on limiting any losses to taxpayers, tied the potential aid to the federal debt limit. Still, they also raised that ceiling to $10.6 trillion from the current $9.815 trillion in the bill.
Washington-based Fannie and McLean, Va.-based Freddie own or guarantee about half of the $12 trillion of U.S. home loans outstanding. The companies face mounting losses stemming from the collapse of the subprime market.
Automakers, manufacturers and other companies that qualify for the tax credits would benefit by as much as $30 million for making the investments this year.
Lawmakers said automakers could benefit from the tax changes as well as airlines; manufacturers such as Goodyear Tire and Rubber Co. and Owens-Illinois Inc.; and energy companies such as CMS Energy Corp., Arch Coal Inc., and Murray Energy Corp.
Reacting to the passing of this legislation, Speaker Nancy Pelosi said, “The bill the House takes up today, if enacted, will represent the most far-reaching reform of our nation’s federal housing finance system in a generation…Owning a home is an essential part of the American Dream. It’s not only about what it means to individuals, it is what it means to the community, putting down roots. It is what it means to the economy as we take an interest in our homes and make them habitable. By expanding homeownership opportunities and protecting families against foreclosure, we are helping keep the American dream of owning a home alive. By restoring confidence in the housing market, our economy can begin to grow and create jobs for the American people again.”
What’s more, the National Association of Realtors® President Dick Gaylord, said, “Realtors® are in the business of building communities, and our 1.2 million members understand that this legislation will go a long way in helping people buy and keep their homes,” said NAR President Dick Gaylord, a broker with in Long Beach, Calif. “We look forward to prompt Senate action to finalize this bill, helping ensure that every American who can afford to own a home and wants to do so will have the opportunity and that everyone who responsibly owns a home is able to keep it. This bill must get to the president quickly, and we urge him to act immediately to sign it into law.”
“The $7,500 tax credit for first-time home buyers is a needed stimulus for a weak housing market,” said Gaylord. “This bill would extend the tax credit availability through June 2009, which would have a further positive effect on the housing market.
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