The Housing Bill – The Housing and Economic Recovery Act of 2008 was passed by the Senate on Saturday and is expected to be signed into law sometime this week. The bill will actually take effect on October 1st. There have been a lot of rumors as to how this will shake out, but these are some highlights of what has been agreed to and will be in the new bill:

• A bailout of Fannie Mae and Freddie Mac, raising their debt ceiling and authorizing the government to purchase their stock as needed in order to keep them afloat. They are also now subject to more regulation than in the past.
• Foreclosure relief for some homeowners who bought in the last few years. The lenders have to approve it, so in a way this provides an option for a short-refinance. It will only work if the lender goes along with it and the borrower will have to split their equity with FHA if they sell their home for a profit at some point down the road.
• FHA will raise their minimum down payment from 3% total investment to 3.5%.
• FHA will eliminate the down payment assistance programs or DPAs (Nehemiah and AmeriDream) which allowed seller concessions to be used as a way for home buyers to buy with no money down.
• A 12 month moratorium on the FHA risk based pricing, which just went into effect 2 weeks ago.
• A tax refund of up to $7,500 for first time home buyers – but this will have to be paid back over the next 15 years, so it more of an interest free loan than a refund.
• A streamlined approval process for FHA condos.
• The maximum loan limits for both Conventional and FHA financing will change based on the median home price for the area, it’s still not certain what it will be here in the Chicago area.
• A nation wide licensing system for loan originators – we already have this in Illinois.

Some of this is going to be good for the market, but things like increasing the minimum FHA down payment and doing away with the down payment assistance programs will make it harder for otherwise qualified people to buy. There is talk that a separate bill will try and resurrect the DPAs, but once they are gone it will be harder to bring them back. If you are looking to buy a home here in the mortgage chicago il area and you lack the down payment, this may be your best chance to buy. A Down Payment Assistance program combined with an FHA loan is still a way to buy with no money down, but you will need to close by September 30th.

There is a lot more in the bill - it is over 700 pages long. A lot of what this means will be open to interpretation and clarification down the line. I’ll keep you informed as I hear more details.

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