The federal government is poised to enact a major housing bill that aims to assist first-time home buyers, homeowners who need to refinance their mortgage and an assortment of housing-related companies.
The House of Representatives has already passed the 694-page bill, which is now being heard in the Senate. President Bush has said he will sign the bill, which could be on his desk within a few days.
The details won't be official until the ink dries on the President's signature, but here's a summary of several key points:
FHA refinancing program
A new FHA loan program would be established to help struggling homeowners refinance their mortgage with a new 30-year, fixed-rate FHA loan.
To qualify, the homeowner must:
- have an existing mortgage originated before Jan. 1, 2008,
- be unable to afford the payments on that mortgage,
- have a mortgage debt-to-income ratio of at least 31 percent (or potentially higher),
- live in the home and
- meet a number of other requirements.
The homeowner's current lender would have to agree to reduce the amount owed on the existing mortgage to no more than 90 percent of the home's current market value.
Borrowers who want to apply for this program should first contact their current mortgage servicer and then an FHA-approved lender. Borrowers will have to pay a monthly premium for FHA mortgage insurance, be reasonably able to afford the payments on the new mortgage and share a portion of future appreciation in the value of the home with the FHA.
First-time home buyer tax credit
Home buyers who purchased a home on or after April 9, 2008, or before July 1, 2009, and had not owned a home during the previous three years would be eligible for a federal income tax credit of up to $7,500. The credit would have to be repaid over a 15-year-period and would be phased out for taxpayers whose adjusted gross income exceeds $75,000 (single filers) or $150,000 (joint tax return).
Higher loan limits
The maximum loan limit for FHA-backed loans would be increased to 115 percent of the local-area median home price. The maximum loan limit for loans that could be purchased by Fannie Mae and Freddie Mac would be set permanently at $625,500. The Department of Veterans Affairs loan limit also would be increased.
New Fannie Mae, Freddie Mac regulator
A new federal regulator would be created to oversee Fannie Mae and Freddie Mac. The government's thinking is that a new tougher regulator would enhance Wall Street's confidence in the two government-sponsored mortgage companies. That could indirectly result in lower mortgage interest rates, which would be an added benefit for home-loan borrowers.