PRESIDENT BUSH SIGNS HOUSING RELIEF BILL! Here's What it Means!
PRESIDENT SIGNS BILL WITHOUT MUCH FANFARE, PRESS COVERAGE IN THE OVAL OFFICE YESTERDAY!
The highly-anticipated Housing Relief Bill is now law! It won approval from lawmakers eager to take some action against the ongoing housing market slump, and continuing credit crisis, affecting home owners and would-be home buyers in Chicago, and elsewhere.
"By expanding homeownership opportunities and protecting families against foreclosure, we are helping keep the American Dream alive," said California Democrat, and House Speaker, Nancy Pelosi.
Included in the bill - an additional $300 Billion in loan backing from the Federal Government for certain sub-prime mortgages for distressed home borrowers; nearly $4 Billion in government funds to help local municipalities fix up and re-sell foreclosed, blighted properties; and, a $7,500 first-time home buyer tax credit, which can be repaid, without interest, over 15 years.
With the number of filed foreclosures growing monthly, experts predict the total homes in foreclosure can exceed 2.8 Million units by the end of next year. The new measure would allow roughly 14% of them to refinance into a lower-rate, more affordable, FHA-backed loan. To qualify, homeowners would have to show they are paying more than 31% of their income toward housing costs, and demonstrate they would be able to afford the new, lower-cost loan.
The bill also increases the Jumbo Loan Threshold to as high as $625,000 for home loans in high-cost areas of the U.S. However, the limit for Conventional and Jumbo Loans will remain considerably lower here in the Chicago Metro Area, where it will be capped at 115% of the median home value in the metro area (currently, the Cook County Median Home Price is $274,500).
Chicago-area home buyers would face a $417,000 Jumbo Loan Threshold, as before - and an estimated $315, 675 FHA Loan Limit, based on current numbers.
Also included is a temporary line of credit for troubled U.S. sponsored mortgage backers and guarantors Fannie Mae and Freddie Mac. The unlimited credit lifeline allows the U.S. Treasury to lend the two mortgage giants necessary funds, or purchase their stock, to assure their solvency amidst growing loan default. Fannie Mae and Freddie Mac back over 50% of mortgage loans nationally.
The Housing Relief Bill also completely overhauls the Federal Housing Administration (FHA), creating higher mortgage loan standards from buyers with blemished credit. It also requires greater accountability and disclosure by loan originators and lenders, requiring them to counsel their buyers on how high their adjustable-rate mortgage payments can actually increase. Pre-foreclosure counseling is also required of lenders.
Prohibited under the new law - Seller Down Payment Assistance Programs, where the home seller would contribute part of a buyer's down payment to a third party, who would later charitably credit the home buyer, minus an "administrative fee." In recent years, many with very low down payments sought such seller assistance, later finding themselves in default due to higher payments, and low home equity.
Read more about the Housing Relief Bill in Jennifer Loven's story in yesterday's Chicago Tribune. Also, see the summary sheet via Realtor.org, the Website for The National Association of Realtors. Here is the link to coverage in today's Wall Street Journal, by reporter Damian Paletta.
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