Daily Real Estate News  |   February 13, 2009  |     Stimulus Advances With Tax Credit Changes The $790 billion stimulus package hammered out by House and Senate conferees late yesterday increases the home buyer tax credit to $8,000, from $7,500, and drops the repayment feature for buyers who hold on to their property for at least three years. The NATIONAL ASSOCIATION OF REALTORS ® has sought removal of the repayment requirement because it discourages buyers from taking advantage of the tax credit. The three-year minimum holding period is a safeguard against speculators' use of the credit. The legislation also extends the effective date of the credit to December 1 from June 30, and extends eligibility to borrowers who buy their home with the help of state or local financial assistance that comes from the proceeds of tax-exempt mortgage revenue bonds. The credit remains open only to first-time buyers (those who haven't owned in at least three years) and some income eligibility restrictions apply, but those are unchanged from the existing program. Other provisions reportedly in the bill that could help housing markets and communities include: FHA and conforming loan limits. Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities may also be available at the discretion of the secretary of the U.S. Department of Housing and Urban Development. Foreclosure mitigation and neighborhood stabilization. Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized. Some news reports put the funding level at $2 billion. Rental assistance. Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crisis. Transportation infrastructure. Up to $29 billion for highway construction projects, $8 billion for rail projects, and $5 billion to weatherize low-income homes. Rural housing development. Increased funding for the Rural Housing Service direct and guaranteed loan programs. Low-income housing grants. Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations Tax-exempt housing bonds. Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds Energy efficient housing. Grants for energy retrofits for federally assisted housing (Section 8), funding for energy efficiency and conservation block grants to states, and Increases in the residential tax credit through 2010 for certain energy efficient upgrades. Source: NAR, AP, Washington Post, New York Times, Bloomberg, and Wall Street Journal.

Daily Real Estate News  |   February 18, 2009  |       Fannie and Freddie Plan Big Fee Increases Fannie Mae and Freddie Mac are both toughening their credit score and down-payment rules as of April 1. In response, major lenders are already factoring in the higher fees, which reduces the effectiveness of the stimulus efforts. Under the new guidelines, buyers with down payments of less than 25 percent will be charged a three-quarter point add-on penalty, no matter how high their credit score. Buyers of duplexes, where one unit is owner-occupied and the other is rented, will be charged a 1 percent add-on. Refinancers who take cash out will be charged as much as three points if they have a low to moderate equity stake. Freddie spokesman Brad German says the loan categories and credit risk combinations targeted by these fees "default at four to eight times" the rate of other mortgages backed by Freddie. "We have to manage these risks appropriately," he says. Source: Washington Writers Group, Kenneth R. Harney (02/15/2009)   Daily Real Estate News  |   February 18, 2009  |     5 Tips for Homebuyers Seeking a Mortgage Here’s a warning for potential borrowers: Nervous lenders have tough new rules and are paperwork crazy. "Borrowers are going to have to prove they are the borrower they say they are," says Keith Gumbinger, vice president of HSH Associates, a mortgage-industry publisher in Pompton Plains, N.J. Gumbinger says homebuyers should consider these things before they apply for a loan. 1. Down payments are critical. Borrowers should expect to put down at least 10 percent for a “conforming loan” – a mortgage that Fannie Mae and Freddie Mac will purchase. 2. Credit scores count. A 720 on the 850-point FICO rating scale will get a borrower access to the best rates. Rich Bira, branch manager of FCM Direct Lender in Chicago, says: "A score between 720 and 739 gets 0.125 percent added to the rate, a score between 700 and 719 gets 0.375 percent added to the rate, and a score between 680 and 699 gets 0.5 percent added to the rate.” 3. Consider VA and FHA. Borrowers without down payments or with less than stellar credit scores should consider these government-insured loans offered through the Federal Housing Administration of the Veterans Administration. 4. Unearth the records. Before applying, borrowers should organize tax, banking and other records that prove income, savings and debts. They should also expect to be patient about what may seem to be endless requests for information. 5. Get rid of debts. Limiting debts, including what borrowers expect to pay for the mortgage, to less than 43 percent of gross income is important. Source: Chicago Tribune, Mary Umberger (02/15/09)