Here Are Some of the Major Provisions
Temporary Home Buyer Tax Credit.
For first-time home buyers, a tax credit will reduce taxable income the first year after buying a home. The House proposed creating a temporary tax credit with a ceiling of $7,500 that could be used by first-time home buyers or those who have not owned for three years. But that money would have to be repaid over 15 years. There is a similar proposal in the Senate that would allow for a credit of $7,000 for buyers who are purchasing a foreclosed property. The hope is that this will help stimulate home sales and begin to stabilize market prices. The most recent Shiller/Case index shows that homes nation wide have dropped more than 15%, just this year and no bottom in sight. ARMs will continue to re set through 2010, no doubt putting more supply on the market as home owners find the payments to high or just to illogical to make.
FHA Modernization Act
Would reduce down payments and raise maximum mortgage amounts for Federal Housing Administration-insured loans. A version passed the Senate by an overwhelming 93-1 vote. Senators also approved the Mortgage Forgiveness Debt Relief Act, which would remove the controversial tax on “phantom income” when lenders forgive portions of the balances on mortgages of financially stressed homeowners for a three year period.
The Senate bill raises the FHA’s loan limits to $417,000, now equal to Fannie Mae and Freddie Mac limits. The House version ties the limits to median home prices. This approach could help higher priced markets like San Francisco by boosting loan limits to $700,000. It also includes a new FHA foreclosure prevention program to help as many as 400,000 at-risk borrowers stay in their homes.
Freddie Mac and Fannie Mae Reforms
They buy mortgages from lenders giving lenders the cash back to make new loans to home buyers. Changing the way they are regulated will enable them to offer more loan programs or to refinance troubled loans on a greater scale
Bills pending in both houses would change oversight to Fannie Mae and Freddie Mac and allow them to increase liquidity in the nation’s mortgage markets. One bill, H.R. 1427 includes a provision calling for a permanent adjustment for high-cost loan areas based on the area median home sales price up to 150 percent of the national limit. Others call for a two year limit to help the housing markets through a trough, until the jumbo loan market comes back.
Low Income Housing Tax Credits.
This program provides incentives to builders to construct affordable rental housing. But many builders can’t afford to build these types of units. The cost of labor and commodities forces builders to focus on high end properties to justify the risks of fronting development. The house is considering provisions to temporarily increase the cap for federal low-income housing tax credits (LIHTCs).
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