Bush signs housing bill to provide mortgage relief

Approximately 400,000 Americans are expected to benefit from the "Housing and Economic Recovery Act of 2008," which President Bush yesterday signed into law. One of the most significant provisions of the bill is that it allows homeowners facing foreclosure to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas. Additionally, the legislation requires lenders to show how high a borrower's payment could get under the terms of a new mortgage and provides $180 million in pre-foreclosure counseling for struggling homeowners. A low-income housing tax credit is also expanded and first-time home buyers will receive a tax credit of up to $7,500 for homes purchased between April 9, 2008 and July 1, 2009. The credit serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.

MAKING SENSE OF THE STORY FOR CONSUMERS
. 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. Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008.
. The legislation creates a nationwide loan originator licensing and registration system to protect consumers from predatory lending practices. The requirements do not apply to those only performing real estate brokerage activities unless they are compensated by a lender, mortgage broker, or other loan originator. States will have the ability to implement more stringent laws.
. Although initially the main reason for President Bush's veto threat, the bill also includes $3.9 billion in neighborhood grants. It is believed that this allotment will assist with stabilizing home values by allowing communities to purchase and refurbish foreclosed homes leading to reduced neighborhood blight.
. Previously precluded from the economic stimulus loan limits passed in February, the recently signed housing legislation temporarily raises the loan limit for the Veterans Affairs home loan guarantee program to $729,750 from $417,000 until December 31, 2008.

Source: C.A.R. July 31 2008