On July 30, 2008 President Bush signed into effect the bill, H.R. 3221, The Housing and Economic Recovery Act of 2008 authorizing the Federal Housing Administration to refinance loans for up to 90 percent of a home's appraised value, which would help homeowners who owe more than their home is worth. Leaving Lenders with second-home loans to be wiped out and who may not agree to the FHA loan arrangements if they don't also hold the first mortgage on a home. To take advantage of the new program, a homeowner or his mortgage broker would need to convince the lender to write off the amount that the original loan exceeds on the home's market value, plus 10 percent. Lenders would need to write off tens of thousands of dollars on each of the FHA refinanced loans, and the lenders may not be able to take a financial hit of that size, leaving the FHA refinance option to probably work for only a small percentage of financially struggling home owners.
Then on August 1, 2008, a new bill H.R. 6694, The FHA Seller Financed Down payment Reform and Risk Based Pricing Authorization Act of 2008 was proposed by U.S. Representative Al Green (from Texas) and co-sponsored by U.S. Representatives Gary Miller (of California), Maxine Waters (also of California) and Christopher Shays (Connecticut).
This is a new bill that might bring life back to down payment assistance and non-profit companies such as Nehemiah and Ameridream. The bill currently looks like the only hope to keep down payment assistance around after October 1st, 2008 as it would again allow Down Payment Assistance (a.k.a. DPA) to be an allowable gift source for FHA loans. Currently, the recent passing of H.R. 3221 has left down payment assistance discontinued as of October 1, 2008.
Due to the vast amount of foreclosures down payment assistance was included in the recent housing bill and ironically loans with down payment assistance were the majority, not including the loans originated after the Fannie Mae and Freddie Mac programs ended.
How does this new Bill Differ from H.R. 3221?
In order to qualify:
- FICO Scores over 680 get a 'free pass' to use Down Payment Assistance.
- FICO Scores between 620-680 may require mortgage insurance
Pricing Difference:
- The bill requests authorization for risk-based pricing, which is similar to the risk-based pricing that Fannie Mae implemented in the first quarter of this year. If a borrower has less than a 680 FICO score (or 720 in some cases), you will pay a higher interest rate.
Interpretation of the proposed bill
As this bill was just released over the weekend and it has raised a lot of discussion in the mortgage industry, I wanted to share it with those of you in my database. I'm interpreting the bill verbiage and information to the best of my knowledge and as I am not an attorney, would be happy to recommend one to you for a legal determination . There may be some changes needed to this proposed legislation, which I am sure we will see coming.
Who Does this really Affect?
You and those you may know who have been looking at buying a home and cannot come up with the 3% required down payment. Many Americans that are still managing to make their house payments have to purchase their home with little to no money down. So if programs like the seller down payment assistance are taken away, you're going to scare alot of potential buyers right out of the market.
Over the past year, over 32,000 Americans have called on Congress and the Bush Administration to keep down payment assistance around. Some of the large supporters include:
- National Association of Homebuilders
- Labor Council for Latin American Advancement
- U.S. Conference of Mayors
- Congressional Black Caucus
- Congressional Hispanic Caucus
Talk about a diverse group of supporters. It's obvious that this impacts many Americans and I encourage YOU to take action and do what you can to support this bill. It's a very big deal.
Want To Help Keep Down payment Assistance Around?
Contact your local state representatives! Let them know why you feel Down Payment Assistance is important for Americans.
In the Meantime, if you or someone you know is looking at purchasing a home, let them know that they have until October 1st to close on a loan with down payment assistance. If they need help in getting qualified, let me know. I would be glad to help!
Wishing you all the very best.
Dawnmarie Hatfield, Realtor ®, TRC
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