Housing and Recovery Act of 2008

I received the following information recently regarding pending changes to FHA home lending. Many of these changes are designed to not only streamline the system but also to make funds available for those buyers who up until recently would be looking at conventional mortgages or first and second mortgages. These loans do not require a large down payment and are generally more flexible with qualification terms than conventional loans are currently.

This information changes constantly so you can always call or email me for the most current info.

• Senate passed the above Bill on Saturday, expected to be signed by President Bush shortly
• Bill covers

-FHA Modernization

-FHA Rescue(Foreclosure relief)

-GSE Reform

-Secure and Fair Enforcement for Mortgage Licensing Act of 2008

-Tax Provisions(tax credit)

-Main impact for us in the next 60 days is the FHA piece (for loans that are not approved by an underwriter with a property and case# after September 30 2008). They need to be under contract and underwritten by Sept 30^th.

-Seller Down Payment Assistance is going away.(ie. No more Futures, Ameridream, Nehemiah)

-The required Downpayment will be increased from 3 to 3.5%(difference can be gift/grant from acceptable source)

-Effective Oct 1, there will be a one year moratorium on the risk based pricing that was recently implemented. This is the increased mortgage insurance if their credit score is below 680.

-There will be changes in how the maximum FHA loan amount for an area is calculated from 125% of median home price(stimulus package) to 115% of median home price. We are anticipating that this will reduce our maximum FHA loan amount from those counties with $295,000 down to $272,450. However there are differences in opinion on whether this will be effective the Oct 1^st date or year end.(when the original stimulus package expires)

-Separate from FHA changes is the introduction of a tax credit for first time homebuyers(defined as not having owned a home in the last 3 years) of 10% of purchase price but no more than $7,500. There are income limits $75,000 for individual and $150,000 for family. This is for purchases of homes this year and the first 6 months of 2009.(There are questions on how this will work and the IRS is looking at this)

-This also will also bolster FNMA and Freddie Mac as it create stronger regulation for these GSE’s.

Remember for the FHA provisions of this bill that nothing is set in stone until HUD issues a Mortgagee letter.