Friday, July 11, 2008: The U.S. Senate passed a housing stimulus bill today. Among other things the bill increases the Low Income Housing Tax Credit, which supports building affordable rental housing for low income families.
The bill also creates a new regulator for Fannie Mae and Freddie Mac, while at the same time removing some of the more draconian measures which would have severely limited those Government Sponsored Enterprises from purchasing mortgage loans.
The Senate, probably wisely, barred zero-down (100% loan-to-value) mortgages from being purchased by Fannie and Freddie. The recent trend of foreclosures has been three times higher with 100% financing than with loans with a down payment. In fact, the new bill raises the minimum down payment to 3.5% from the previous 3%.
This provision will affect down payment programs like Nehemiah and AmeriDream, which helped hundreds of thousands of low income families achieve the American dream of home ownership through seller-financed down payments. That said, in today's credit climate it probably makes good sense not to subsidize 100% financing.
The bill now goes to the House of Representatives.
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Brian Schulman offers expert real estate representation to Lancaster County, PA home buyers and home sellers. To learn more, visit http://www.FindLancasterHomes.com/ |
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Brian Schulman offers expert real estate representation for buyers and sellers of homes in Lancaster County, PA. To learn more, visit http://www.FindLancasterHomes.com/ |
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This is pretty good news overall, dont you think ? Doesn't also include a proposed $8000 tax credit to new home purchasers. That has been my biggest belief that should be included in the bill to provide incentive for a lot of people to get off the fence in purchasing.
I think it's great that we're finally not giving in to the "I want it Now just because I breathe,I'm entitled to it mentality. Let's teach people to save and be responsible like the generations before us. Good stuff
Christopher & Stephanie, you may be right. The only tax credit information I have seen so far on this bill has to do with low income apartment construction credits offsetting the Alternative Minimum Tax, which of course would be helpful to investors.
Thanks, Holly, I don't like to see the underwriting standards lurch from one extreme to the other. For the last six or seven years, lenders were way too lax in qualifying borrowers, because they were trying to make the maximum number of loans, and hence profits. Now they're all running scared and giving even solid borrowers a harder time.
I don't think 100% loans are a great idea in any market, because it's too easy for borrowers to walk away from them if things get tight, without losing of their own down payment. There has to be a happy medium between credit standards too loose and credit standards too tight.
I find myself agreeing the Brian. I'm seeing very solid poeple being denied loans. Also, rents in my area are skyrocketing...its getting almost impossible to stabilize outlay without buying something. If these middle class people could get a loan for a cooperative, they would be far more stable and be able to build some equity.
Ruthmarie, I haven't yet seen much evidence of rents increasing in Lancaster County. It may come about, though, if mortgages continue to be harder for qualified borrowers to get.
Brian..did this vote come to pass before or after the collapse of that big bank today?
Joan, the Indy Mac announcement came afterward as far as I am aware.