CREST Team Blog

The Senate FHA Modernization Bill referred to in my last article was approved on December 14^th by a 93 to 1 vote. The Bill calls for an increase in loan limits from $362,790 to $417,000. The Bill also contains a provision for allowing the FHA to insure refinanced loans for borrowers who are delinquent on mortgages as a result of balloon payments on subprime loans. The third major portion of the Bill would reduce the minimum down payment on a FHA insured loans from 3 percent to a flat 1.5 percent of the appraised value of the home.

A separate but similar House Bill passed last September raises the FHA loan limit to $729,750 , or 175 percent of the Conforming Loan Limit. This Bill is providing for a 0 percent minimum down payment. The two bills are in agreement when it comes to categorizing Condominiums. Both Bills categorize Condos as Single Family units.

These two Bills will be reviewed by a conference committee who will come up with a final draft. The finished bill will then be given to the President to be signed.

While these are important measures hailed and welcomed by Realtors and Realtor Trade organizations throughout the country, their impact on the overall housing market in California will likely by minimal. The Senate Bill limits loan guarantees to $417,000. This won’t be much help to first time buyers in California where the median home price was reported by the California Association of Realtors to be at $497,000 as of October 2007.

First time buyers in Orange County, where C.A.R. reports median home price for November 2007 is $661,580, will see even less benefit from the Senate Bill. Hopefully the conference committee will present a Bill to the President with a ceiling limit closer to the House Bill version of $729,750.

The other Act referred to in my previous article was the Mortgage Debt Relief Act, which was signed into law by President George W. Busch on December 20^th. As previously mentioned, this law allows borrowers to escape taxes on debt forgiven by their lender on a mortgage for a principal residence. There are other conditions, so check with your accountant or lender before making any final decisions.

A Steady Pulse for Housing

Americans remain convinced that buying a home is a good long-term investment. Nearly nine out of 10consumers believe that buying a home is a good financial decision, according to the 2007 National Housing Pulse Survey, released earlier this month. The survey, which measures how affordable housing issues affect consumers, also shows that 59 percent of respondents think that now is a good time to buy. That number is even higher at 64 percent in areas where home prices have recently declined.

Government Help

The Bush administration and the mortgage industry are working out a proposal to temporarily freeze interest rates on certain troubled subprime mortgages. If adopted, it would be the biggest action taken to cope with the current problem.Some of the provisions of the proposal may be highlighted in a speech by Treasury Secretary Henry Paulson. The speech is scheduled to be presented to a national housing conference on Monday.

Interest Rates

Federal Reserve Chairman Ben Bernanke on Thursday suggested that another interest rate cut may be needed to bolster the economy. Some news agencies are suggesting it may be as much as a half percent drop in interest rates. Whatever the amount, the Fed may lower interest rates when it meets on Dec. 11, its last session of the year.

Expanding American Homeownership Act of 2007

The U.S. House of Representatives passed H.R. 1852 on September 18 2007. The bill is called the “Expanding American Homeownership Act of 2007.” This Bill provides an amendment to increase the FHA loan limit to 125% of an area’s median home price, capped at $729,750.00. The intent is to allow the FHA Mortgage insurance program to compete in the current housing market. Other improvements in the bill are:

1. Extend mortgage term length from 35 to 40 years;
2. Allow FHA to insure zero-down mortgages in certain circumstances;
3. Allow FHA to use risk-based pricing when setting mortgage insurance premiums;
4. Increase mortgage counseling for home buyers to help them use the program and avoid foreclosure;
5. Increase the number of reverse mortgages lenders may do.

The passage of this Bill by the House clears one more hurdle for Realtors Associations supporting this legislation to get this bill through the Senate.

Mortgage Debt Relief

Another bill being supported by Realtors Associations is the Mortgage Cancellation Debt Relief Legislation. Under certain circumstances homeowners may be able to avoid being taxed on the amount of debt forgiven in a short sale. This Bill has passed the House Ways & Means committee and is now headed to the full House for a vote.

For additional information on any of these topics please call us or send an email.