Today President Bush signed the housing rescue act into Law. I have mixed emotions on this as clearly its us the tax payers who will pay for this. The main parts of this are as follows:
A permanent increase in "conforming loan" limits. The law will permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000. This will really help bolster home sales and refinances and it will allow borrowers to get a better conforming rate instead of a higher jumbo loan interest rate.
The Federal housing administrations role. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value. The FHA maximum loan limits for high-cost areas would also increase to a maximum of $625,500 as well. This is one part of the law that I like this will help bolster the housing market in my opinion. The law would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.
A new home-buyer credit. The new law includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments. This part is disappointing to me as it really just helps a little bit upfront but come on it has to be paid back too!
A ban on down-payment assistance from sellers. The new law eliminates a program that has allowed sellers to provide down payment assistance for FHA loans. This part is also very dissappointing as this hurts first time home buyers in my opinion.
So there is some help on the way as this starts October 1st but not without a cost for sure.
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