Housing and Economic Recovery Act of 2008 - A Few Nuggets For You

The recently passed housing rule signed by President Bush includes numerous changes, but I thought I would share a few with you here (for a full version of the bill, go to http://www.thomas.gov/ and search by bill number for HR 3221, and make sure to view the "EE R" version which is the final version) :

1. A new agency was created to regulate Fannie and Freddie with much broader powers - Federal Housing Finance Agency. Fannie and Freddie now has unlimited government line of credit for 18 months - This will help ease the liquidity crunch we've experienced in last 12 months.
2. Loan limits will be set to $625,500 for high cost areas, including the Bay Area. The limits will adjust again in 2010 based on FHFA home price index. If prices decline, there will be one year lag on downward loan limit adjustments. - This means that if you have a loan amount between $625,500 - $729,500 now, and are considering refinancing or buying, you should do something now before year end to take advantage of the Conforming Jumbo rate.
3. Hope for homeowners - new FHA program - current lenders to write down mortgage balance to 90% of current appraised value, but the borrowers will have to share future equity appreciation with government. - This one seems great at first glance, but a closer look will reveal that it can still be costly to the borrowers and the eligibility standards are pretty strict. For more information on how this might apply to you, contact me for a consultation and I will go over the details with you.
4. Tax Incentives - 1st time home buyers will receive tax credit of 10% of the purchase price of the home not to exceed $7,500. However, it phases out if modified adjusted gross income exceeds $75,000 single or $150K for married filing jointly. There is a recapture of credit over 15 years. - Essentially, this is a free loan from the government.

For more questions, feel free to contact me.

Where is the Mortgage Rate going?

Everyone seems to be interested in where the mortgage rates are going because there are still so many people out there who are either looking and waiting to buy or refinance their existing ARM rates that have adjusted or about to adjust. For those of you who waiting for rates to improve, you may be disappointed by the recent activities in the mortgage market.

Freddie Mac has announced that it is increasing the Market Condition delivery fee rate from 25 to 50 basis points. Additionally it will be implementing additional risk based pricing adjusters, for LTV, Credit score and other risk factors. Freddie is also modifying several other delivery fees for Alt-A, A-minus products to equate their pricing with the risk in those products.

What does this mean in plain English? Freddie Mac is one of the agencies that buys conforming loans from lenders who originate mortgage loans. This statement means that Freddie will increase their fees for buying certain type of loans, and in turn, this increase will get passed to consumers in the rates they will be getting.

So, my advice to those who are still waiting is to get your paperwork together and get moving. At the minimum, talk to a mortgage planner to understand all your options.