Me Myself N My Mortgage Theories

The new housing rescue bill - Hope for Homeowners Act of 2008 is being signed into law by President Bush. It aims to provide mortgage relief to thousands in financial problems and modernize the FHA so that it can back loans for risky borrowers.

Here are the key points stated in the Housing Bill:

Tax credit for first time buyers:
If you’re a first time buyer (that is, you haven’t owned a home for the past 3 years), the law will provide you with tax credit up to $7500 but not more than 10% of your home purchase price. However, only those who have bought their homes after April 8, 2008 and prior to July1, 2009 are eligible for the tax credit.

With this credit, your tax bill for the year of purchase will get reduced by $7500 maximum. So, if you buy a house in 2008, you’ll get the credit this year itself, that is for which you’ll have to file your tax returns by April 15, 2009. But if you buy the home by June, 2009, the tax credit will be available to you for the 2009 tax year.

However, you need to repay the credit within the next 15 years and you’ll have to start paying 2 years after your home purchase. If the house is sold prior to the repayment period, then you’ll have to pay the remaining tax to the IRS.

Ban on Non-profit down payment assistance:
Down payment assistance programs offered by Nehemiah and AmeriDream will be banned from October1, 2008. The FHA thinks that loans using down payment assistance have higher chances of default. But the congressional democrats have always protected the down payment assistance thinking that it helps low income minorities have their own homes. But now that the Senate has won, such assistance will no longer be accepted from the specified date.

Debt forgiveness for refinancing into FHA:
As per the Housing Bill, if you’re a troubled homeowner, chances are that the lender may forgive what you owe above 90% of the home’s current appraised value. You can then refinance the existing loan with FHA mortgage. But there’s a catch – you’ll have to share your home price appreciation with the FHA when you sell or refinance your home less than a year after you’ve refinanced with the FHA loan.

Working with home equity debt:
Lenders who’ve offered equity loans and lines of credit will lose the entire balance under the FHA refinance plan. Just as first mortgage lenders, second lien holders can also share the home appreciation proceeds collected by the FHA.

Well, there is much more to this law – it simply doesn’t stop here. I’m planning to cover the entire stuff in my next post.

Have a nice weekend

Technorati Tags: new housing bill, housing rescue bill, hope for homeowners act

This entry was posted on Saturday, August 2nd, 2008 at 6:09 am and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.