The Housing and Economic Recovery Act of 2008, which was signed into law by President Bush on July 31, won't open the flood gates for all buyers, but it is a boon for first-time homebuyers, homeowners struggling with subprime loans, as well as the mortgage industry, according to local Realtor officials.
For the past several years, the National Association of REALTORS® and the California Association of REALTORS® have aggressively lobbied for Congress to pass numerous provisions found in this historic bill.
"We are pleased that the president and Congress worked together to enact meaningful legislation that protects and enables families in this country to continue to strive for and enjoy the dream of homeownership," Richard Gaylord, the national trade association's president, said in a statement.
The California trade group's president William Brown said the measure will certainly impact the state of California, which ranks among the top states with a record number of foreclosures.
"This federal housing package represents a significant move in the right direction for California homeowners," said Brown. "The measure will not only help thousands of borrowers facing financial trouble stay in their homes, but pave the way for thousands more to achieve the dream of becoming first-time homeowners."
The Housing and Economic Recovery Act of 2008 will assist an estimated 400,000 homeowners facing foreclosure, many of whom reside in California, by allowing them to refinance their current mortgages with a more affordable Federal Housing Administration (FHA)-backed loan. This particular feature of the bill aims to stem the rising tide of foreclosures that have been driving down home values across the state and creating tougher lending rules that have pushed many potential first-time buyers with good credit off to the sidelines.
The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas. The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area's median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area's median home price, up to $625,500. The Economic Stimulus Act of 2008, signed in February, raised the conforming loan limit in high-cost areas to $729,750 from $417,000, but this change was temporary and is set to expire Dec. 31, 2008, when the new loan limits take effect.
"The housing legislation will give the state's housing market the shot in the arm it needs for recovery," said Silicon Valley Association of REALTORS® president Leannah Hunt.
Hunt, a Realtor with Coldwell Banker, said California Realtors contend incentives for lowering the cost of buying a home are critical in a market where the affordability rate, or the percentage of households in California that can afford to buy an entry-level home, although showing some strength in the recent months, remains at 44 percent.
"This action shows government at its best," added Julia Keady, president-elect of the Silicon Valley Association of REALTORS® and a Realtor with Alain Pinel Realtors. "The federal housing bill will provide stability in our economy and help boost home buyer confidence. It will also help many deserving homeowners who are facing foreclosure keep their homes."
Another key provision of the bill is a tax credit for first-time home buyers, who may now receive a tax refund worth up to 10 percent of a home's purchase price, up to a maximum of $7,500. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years. The credit applies to homes purchased after April 8, 2008 and before July 1, 2009.
Hunt also noted buyers, particularly those sitting on the fence, should take advantage of the current $729,750 loan limit, as well as the first-time home buyer tax refund. "These incentives present buyers a window of opportunity," Hunt said. "As home prices have adjusted to more affordable levels, buyers have just the limited period of time to take advantage of these incentives."
Other provisions of the measure include:
• A foreclosure rescue plan in which lenders would refinance homeowners with subprime loans into fixed-rate, 30-year mortgages backed by the FHA.
• New minimum requirements for mortgage originators.
• A bailout plan for government-sponsored loan companies Fannie Mae and Freddie Mac, if it is needed.
For a summary of key provisions of H.R. 3221, visit http://www.realtor.org/gapublic.nsf/pages/hr_3221_key_provisions?OpenDocument
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.