Help for a distressed real estate market

The House and Senate passed broad-based housing legislation which was signed into law by President Bush early yesterday. Heralded as the most sweeping housing reform since the “New Deal”, it includes the creation of a strong regulator for Fannie Mae and Freddie Mac and changes in both FHA and conforming loan limits, s well as modernization for FHA and the “Hope for Homeowner” plan which may help some distressed homeowners by refinancing them into FHA loans.

Here are some of the key provisions of the Housing and Economic Recovery Act:

• Higher permanent loan limits for conventional conforming and FHA, effective Jan 1, 2009; the act calls for limits to increase to a maximum amount of $625,500 depending on the metropolitan area. (The temporary limits established last March will expire on December 31, 2008)

• FHA floor limits will remain the same at $271,050

• The VA guarantee will increase

• Minimum cash investments for FHA loans will increase to 3.5%

• A moratorium on risk-based pricing for FHA loans will go into effect Oct. 1, 2008

• Seller-funded Down Payment Assistance Programs will be terminated Oct. 1, 2008

• Condo processing for FHA loans will be streamlined

• FHA reverse mortgages (HECM); changes include higher loan limits, availability with purchase transactions, and a modification of the origination fee. (Reverse Mortgages are currently not allowed in WA State due to State Law)

Thanks to our friend Kim Aldrich, Cobalt Mortgage in Port Townsend