The measure lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes. It offers a temporary financial lifeline to troubled mortgage companies Fannie Mae and Freddie Mac and tightens controls over the two government-sponsored businesses.
Jennifer Ames, Coldwell Banker Residential Brokerage, shares some tips for homeowners.
New home buyers:
- To get a loan today, lenders typically want to see at least 10% down for a conforming loan and 20% for a jumbo loan. Your average buyer does not have that much extra cash on hand and is therefore excluded from home ownership or limited to buying a less expensive home. Even though the down payment under the FHA loan programs was increased from 3.0% to 3.5% under this bill, more buyers can afford to buy homes under this program.
- Moreover, the loan limits for FHA and VA loan limits were increased in certain areas by 125%, allowing buyers in high cost areas to qualify. (Note that FHA and VA loan limits are regionally determined based on local market values. In Illinois, FHA and VA loans are capped at around $400,000.)
- The bill provides for a refinance program for homeowners who are struggling to make their payments. While this provision has the potential to be helpful, but it is my understanding that it will be up to the individual banks to choose whether or not they want to participate. The big question in my mind is how these programs will be administered given the volume of foreclosures that are already in the pipeline.
- Another potential solution for struggling homeowners is a provision in the bill that provides for $10 billion in mortgage revenue bonds to raise money to refinance sub-prime mortgages.
- There are areas in some states where foreclosures are bringing down entire communities. This bill provides $4 billion for neighborhood revitalization to give communities the power to buy back foreclosed homes and restore stability in the area.
Coldwell Banker Residential Brokerage
The Associated Press contrbuted to this report. All rights reserved.