The housing bill is NO SUCH THING.....Well it finally makes sense and here's why: This was NEVER a housing bill. It's a banking bill. The legislation signed this week, has hidden costs and in some cases bald faced omisssions that could have helped people. Actually the bill will accomplish what the government has been trying to do for the better part of 2008: Save the banking system by hopefully stemming the tide of foreclosures.
As far as consumers go, the $7500 tax credit for those who buy homes between now and September 2009 is an absolute joke. What hasn't been spoken of is that the credit must be repaid over 15 years which ultimately makes it a loan. Say what? Isn't it this kind of thinking that got people into trouble in the first place, prolonging a penalty when they purchase real estate?
While I'm at it, shame on the National Association of Home Builders and the National Association of Realtors for not telling people about the payback aspect up front in the web site they set up to tout it's virtues. It's garbage like that which wrecks the credibility of Realtors and Builders across the country. Aside from my irritation with the NAHB and the NAR on this, there are still questions about it's affect. Do you have to take the credit? If you don't what will happen when you sell the home and the government wants it's repayment of the credit? Will consumers be responsible for documenting they did NOT accept the credit and if so who's telling them that? As usual a governmnet program has created as many questions as it answers.
The bill also placed a moratorium on risk based financing until September of 2009 as well which was just implemented within the last 30 days. What about those who got a loan in July of '08? Will this be retroactive for them or are they just..ahem..... stuff out of luck?
What about the points of the bill that are attempting to help those in foreclosure? This cornerstone of the housing legislation is intended to ease a shock wave of foreclosures. Many homeowners are in crisis because of rising rates on adjustable-rate loans. They can't meet payments, but can't sell or refinance because of falling home prices, which put them in the position of owing more money than their homes are worth.
Under the rescue plan, to be administered by the Federal Housing Administration, new mortgages must have a fixed rate for a term of at least 30 years and be no more than 90 percent of the home's value. Home equity loans will be prohibited during the first five years. In addition, the borrower will pay an annual fee of 1.5 percent on the remaining loan balance.
The program, which takes effect Oct. 1 and ends Sept. 30, 2011, is expected to help at least 400,000 distressed homeowners, but lenders are not required to participate. Financial institutions won't want to forgive any debt unless they are pretty sure the property is headed for foreclosure, a situation in which they could lose even more. In addition, the mortgage must have been originated on or before Jan. 1, 2008, and be on the borrower's principal residence.
My principle question still is if these home owners are in foreclosure, hasn't their credit been damaged so significantly that no sane voluntary lender would even agree to refinance their current loan?
I suppose this bill will help some but there are still going to be numerous home ownwers who have fallen and will never get up. Like most things that eminate from Washington, they look and sound good in the media but at the end of the day are more for show than actual benefit.
