Housing Relief Bill and what it means to you as an agent

Buyer agents take heart. Your time is just around the corner. Now that the Housing Relief Bill (initially known as the "Credit Suisse Plan") has been passed by congress, certain lenders - who had their lobbyists working overtime on the bill - should be ready to negotiate. Some Prince William County lenders already dropped their REO prices by $130,000 to the median sales price and got rid of almost 25% of their housing inventory stock. The bill authorizes a 3 year program that permits the FHA to insure up to $300 billion in new mortgages for distressed property owners. Only primary residences are eligible and lenders must voluntarily agree to forgive a portion of their outstanding debt so that the new load equals no more than 90 percent of the property's current market value established by a certified appraiser. (After years of pressured overvalued home loan valuations and interested party contributions, I wonder what that value will be) Better get your estimates of market value down pat if you intend to negotiate successfully.

The program also offers $15 billion in tax breaks - up to $7500 per family - for first-time home buyers (or at least a buyer who has not owned a home in the last 3 years). Sorry, no investors need apply. The money must be repaid with interest to the government within 15 years. The FHA maximum loan limit for a single family house has been raised from $362,790 to $417,000. And Fannie and Freddie's limits have been raised to $625,000 - in high prices areas to $729,750. Both Government Services Enterprises (GSEs) will be able to borrow from the Federal Reserve or sell stock to the Central Bank, and they have doubled the fees they pay lenders for negotiating with delinquent borrowers. It permits states to issue an additional $11 billion in tax-exempt bonds to refinance risky high-cost mortgages to first-time home buyers; and finance the construction of affordable housing, it raises the federal debt limit from $9.8 trillion to $10.6 trillion, and creates a new affordable Housing Trust Fund.

Critics claim the billl does more for lenders than borrowers giving lenders a chance to cherry-pick the best loans for themselves while turning the worst over to the FHA. The current Secretary of HUD admits that taxpayer's could easily end up absorbing "preventable and foreseeable" costs unless insurance premiums are raised to cover riskier costs and more safeguards are put into place. However, the bill did cover a FHA pet peeve. The agency had claimed statistics following the practice of sellers donating housing down payments to non-profits, who in turn gave them to the seller's designated buyers for a fee, demonstrated a higher number of delinquencies than when buyers put up their own deposits and pushed to have the practice outlawed in the new bill. But just as soon as a seller funded down payment assistance appeared to be on its way out, new legislation has been introduced to bring it back.

Other critics claim it is wishful thinking with the government making promises in the taxpayer's name, but does nothing to force lenders to stip using accounting gimmicks to keep non-producing loans off their balance sheets. Chief economist for MoodysEconomics.com notes, "It may staunch some of the downturn, but it is going to have a modest positive effect." Still others claim that it will add more junk fees to mortgage costs. My own feeling is that something is better than nothing. With foreclosures hitting 8500 a day in July and many economists claiming that we're still in the 2nd or 3rd inning in a housing comeback anything that motivates lenders to loosen the REO stalemate is progress.

One of my former students, who made the trip from his home in Florida to take my foreclosure class, called me yesterday and said that he found 500 homes in north Miami sitting vacant - all REOs. In my next class, we will cover not only how to estimate true market value, but also how to price a cosmetic rehab and several unique ways to utilize the new housing relief bnill to benefit the first-time home buyer. Many licensees have complained that a weekday 6 hour foreclosure mentoring class presents some time scheduling challenges, so we are moving to a Saturday class. The next mentoring seminar will be held on August 23rd, 2008 from 9:00am-3:00pm at 11501 Georgia Avenue, Suite 312, Wheaton, Maryland 20902. To enroll contact PDI at 301-949-1771 or visit our website.