Mortgage Insights Blog

The Obama administration says 95 percent of taxpayers will get relief. Although there is still a lot of political debate left to go, the new Economic Stimulus Package is edging closer to law everyday and should be enacted as early as next week. Here is what you can expect from the bill – although these items remain speculatory, there exists some common ground among the majority.

Specific changes ahead geared towards the housing market include up to a $15,000 tax credit (or up to 10% of the purchase price, whichever is less) for homebuyers purchasing primary residences during 2009.The tax credit would not have to be repaid and buyers could claim it against their 2008 and/or 2009 tax returns.

The proposed $15,000 home buyer tax credit would replace a much narrower tax credit that was enacted last year and only made available to first-time home buyers, offering a mere $7,500 tax credit that currently works like an interest-free loan that must be repaid over a 15-year period – as of now it is set to expire on July 1.

Other housing-market focused legislation includes:

• Increased funding for the USDA Rural Development loan program, a program that can allow up to 100% financing for qualifying borrowers and ‘rural’ properties. USDA is getting over $10.4 billion for the guaranteed program alone.
• The Hope 4 Homeowners refinance program is being tweaked to allow for hardship in the case of "decrease in income". The private mortgage insurance factors are also being reduced to no more than 2% up front and 1% annual. There is also a provision to entice lenders that have these loans to refinance. They can receive $1000 or more for "performing services associated with refinancing" such mortgages.
• Mandatory mortgage loan modifications and a Foreclosure mitigation section that refer to the $50 billion the Treasury is allocating to mitigate foreclosures. Details are still sketchy but the intent remains in the currently debated legislature. This change could mean that lenders servicing such under-performing mortgages could receive payments not more than $2000/loan as incentive to modify them and seem to be granted the authority to do so if it seems reasonable that not modifying the loan will result in a bigger loss.

These are the most salient points I could find for now but the bill is HUGE! Many sections have been stricken from the bill including provisions continuing the higher FHA loan limits and the reinstatement of seller funded down payment assistance wasn't there; but again, the overall cost of the bill was reduced and that is always a good thing!

I'll let you know when things finalize...