• Redwood City

    Posted on August 9th, 2008

    Written by Ed Gory

    Tags

    The Housing Rescue Bill — What It Means to You, Part 2

    Shaft No, it doesn’t mean you’re getting the “shaft”… I was associating rescuing with heroes, action characters that help us get out of trouble, etc.. What better representation than good old Isaac Hayes? Ok, so it’s a stretch, I know.

    Anyway, here’s the second segment, continuing from yesterday, on what the elements of the newly signed Housing Rescue Bill might mean to you:

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    Loan limits extended permanently

    There are maximum amounts for loans that the FHA will insure, and that Fannie Mae and Freddie Mac will guarantee. Those limits were raised temporarily this year. The new law raises limits permanently.

     

    For FHA-insured mortgages, the new limit will be 115 percent of the median home price in that area, up to $625,500. That provision will affect loan limits in higher-cost areas. In lower-cost areas, the current FHA limits won’t decrease.

     

    For conforming mortgages — those eligible to be bought by Fannie Mae and Freddie Mac — the conforming limit will remain at least $417,000 for a single-family home. It can be higher than that. Starting next year, the new limit is either $417,000 or 115 percent of the area’s median home price, whichever is higher — up to $625,500. After that, the limits go up or down according to a price index.

     

    More regulations on reverse mortgages

    A reverse mortgage is an advance against home equity. It’s for homeowners age 62 or older, and the reverse mortgage doesn’t have to be repaid until the borrowers die or move out.

     

    Because reverse mortgages are for elderly borrowers, there is concern that dishonest lenders and brokers take advantage of borrowers. Borrowers are required to get counseling first, to learn the pros and cons of reverse mortgages. The law will result in strengthened qualifications for counselors.

     

    The law bars insurance salesmen from originating reverse mortgages and prohibits originators from requiring homeowners to buy annuities or insurance products. (There’s one big exception: The FHA insures reverse mortgages, and borrowers will buy that coverage.)

     

    Finally, the law limits origination fees on reverse mortgages. They can’t exceed 2 percent of a reverse mortgage of up to $200,000. For a reverse mortgage amount above that, the limit is $4,000, plus 1 percent of the loan amount above $200,000. Origination fees can’t exceed $6,000 in any case. In future years, this upper limit is indexed to inflation.

     

    Manufactured housing

    FHA-insured loans for manufactured houses are limited to a maximum of $48,000 — a limit that has been in effect since 1992. That limit finally will be increased to about $70,000 and will be indexed to inflation. These are the limits for loans in which the borrower is buying only the manufactured home and not the land under it.

     

    According to the Manufactured Housing Institute, the raised limit will make a big difference to thousands of families. Under the $48,000 limit, a lot of families can afford only single-section homes. The increased limit will allow more people to buy double-section homes — what are colloquially known as double-wides.

     

    The law directs Fannie Mae and Freddie Mac to come up with new products and flexible underwriting standards for manufactured houses.

     

    Veterans

    Service members returning from active duty abroad will be given breaks, effective immediately now that the bill has been signed into law.

     

    Some protections apply to service members whose military obligations affect their ability to repay debts — primarily, reservists and members of the National Guard who are called to active duty. They have to leave their jobs and, in many cases, take pay cuts.

     

    For these service members, there are protections having to do with foreclosures and interest rates. If a service member had a mortgage before entering active duty, a lender can’t start foreclosure proceedings until nine months after the service member returns from active duty. Formerly, the protection period was 90 days.

     

    Also, when someone with a mortgage is called up to active duty, the interest rates on all previously existing debt are capped at 6 percent. That goes for mortgages — and for home loans, that 6 percent cap extends until one year after the service member returns from active duty.

     

    The Defense Department will be required to provide foreclosure-prevention counseling upon request to service members who are returning from active duty abroad.

     

    Miscellaneous

    Other provisions of the law:

     

    ·         It will establish an Office of Housing Counseling, which coordinate all federal housing counseling functions, as well as produce booklets that will be given to people applying for mortgages.

    ·         It will require licensing and registration of all mortgage brokers. Several states have begun to license mortgage brokers and share the information through the Conference of State Bank Supervisors; this law extends that initiative nationally.

    ·         It won’t ask questions about tornadoes. An earlier version of the bill would have commissioned a study into how to “mitigate the risks to manufactured housing residents and communities resulting from tornados.” The inquiry into this head-scratcher will have to wait for another bill; it was deleted in the final version that passed into law.

    This entry was posted on Saturday, August 9th, 2008 at 3:01 pm and is filed under Redwood City. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
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