New Major Federal Laws Enacted for the Mortgage Industry
As expected the House and Senate have passed measures to control the mortgage crisis and the mortgage industry. This legislation is considered the centerpiece of Washington’s efforts to address the housing crisis. Most of these bills were introduced in July of 07, and one year later the President signed these Acts into law on July 30th, 2008. Most provisions of the Acts are effective the date of enactment of the Act, but others including the FHA provisions are effective 10-1-08 and have sunset provision for September 30, 2011.
This combined bill is quite lengthy and covers many areas of the mortgage lending industry. This Act incorporated many Acts into this legislation.
There have been many interpretations of the new legislation recently signed into legislation by the President, so I have tried to review and give you a mortgage professional’s view of the changes. I have also provided the links for your own personal review and interpretation. It will be you call after reviewing if these Acts are a ‘bail out’ or ‘true reform’. You may find more detailed summary or full text at http://www.govtrack.us/congress/bill.xpd?bill=h110-3221 or http://thomas.loc.gov/ (search by bill number of the act HR3221.ENR – ENR is final version)
There are two main Acts of this legislation
THE HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Division A – Housing Finance Reform
Title I, II, & III –Reform of Regulations of Enterprises
Subtitle A – Improvement of Safety and Soundness Supervision
A new agency was created to monitor the mortgage lending industry is called the Federal Housing Finance Agency. The current Federal Housing and Oversight Board was placed in an advisory position to the Director of the Federal Housing Finance Agency. After one year from enactment this division of HUD will be abolished. The section outlines the duties and authorities of the Director and the agency. This section is very detailed regarding the scope of the Director’s authority and accountant, economist and examiner’s parameters. Among the responsibilities is to review the regulated agencies portfolio holdings to ensure they are backed by sufficient risk-based capital or reserves if the Director request to ensure the entity operates in a safe and sound manner. Any fraudulent loans sold to a regulated entity is required to report the loan to the Director.
Authority includes-
Their review and approval of any product to be offered to the public, with special provisions for FNMA and FHLMC. Focus will be for the publics’ best interest.
Part 2 – Sec 1124
Conforming loan limits will be set January 1 based on the percentage increase during the most recent 12 months or 4th quarter period based on the housing price index maintained by the Director. If the market has declined, then no adjustment shall be made for next year. Subsequent declines in following years may be accumulated to reduce the loan limits. High Cost areas will be limited to the lesser of 150% not to exceed 115% of the median house price in the high cost area. This amendment will take effect upon the expiration of the Economic Stimulus Act of 2008.
(I have read in a few interpretations of the Act that it permanently increases the FHA and conforming loan limits beyond the 12-31-08 Economic Stimulus Act of 2008 provisions. I’ve reviewed this Act numerous times, and have been unable to find where this provision is referenced. From what I could find in my research is some areas that were under served with previous standards, such as California, the new formulas may allow the loan limits to increase up to $625,500 for some areas. If you know what section mandates a permanent increase in FHA and conforming loan limits, please advise. Here is the text exactly as it is in the summary from Thomas Library.)
(a) Fannie Mae-
(1) GENERAL LIMIT- Section 302(b)(2) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(b)(2)) is amended by striking the 7th and 8th sentences and inserting the following new sentences: `Such limitations shall not exceed $417,000 for a mortgage secured by a single-family residence, $533,850 for a mortgage secured by a 2-family residence, $645,300 for a mortgage secured by a 3-family residence, and $801,950 for a mortgage secured by a 4-family residence, except that such maximum limitations shall be adjusted effective January 1 of each year beginning after the effective date of the Federal Housing Finance Regulatory Reform Act of 2008, subject to the limitations in this paragraph. Each adjustment shall be made by adding to each such amount (as it may have been previously adjusted) a percentage thereof equal to the percentage increase, during the most recent 12-month or 4-quarter period ending before the time of determining such annual adjustment, in the housing price index maintained by the Director of the Federal Housing Finance Agency (pursuant to section 1322 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4541)). If the change in such house price index during the most recent 12-month or 4-quarter period ending before the time of determining such annual adjustment is a decrease, then no adjustment shall be made for the next year, and the next adjustment shall take into account prior declines in the house price index, so that any adjustment shall reflect the net change in the house price index since the last adjustment. Declines in the house price index shall be accumulated and then reduce increases until subsequent increases exceed prior declines.’
(2) HIGH-COST AREA LIMIT- Section 302(b)(2) of the Federal National Mortgage Association Charter Act (12 U.S.C. 1717(b)(2)) is amended by adding after the period at the end the following: `Such foregoing limitations shall also be increased, with respect to properties of a particular size located in any area for which 115 percent of the median house price for such size residence exceeds the foregoing limitation for such size residence, to the lesser of 150 percent of such limitation for such size residence or the amount that is equal to 115 percent of the median house price in such area for such size residence.'.
(3) EFFECTIVE DATE- The amendments made by paragraphs (1) and (2) of this subsection shall take effect upon the expiration of the date described in section 201(a) of the Economic Stimulus Act of 2008 (Public Law 110-185).
(b) Freddie Mac-
(1) GENERAL LIMIT- Section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) is amended by striking the 6th and 7th sentences and inserting the following new sentences: `Such limitations shall not exceed $417,000 for a mortgage secured by a single-family residence, $533,850 for a mortgage secured by a 2-family residence, $645,300 for a mortgage secured by a 3-family residence, and $801,950 for a mortgage secured by a 4-family residence, except that such maximum limitations shall be adjusted effective January 1 of each year beginning after the effective date of the Federal Housing Finance Regulatory Reform Act of 2008, subject to the limitations in this paragraph. Each adjustment shall be made by adding to each such amount (as it may have been previously adjusted) a percentage thereof equal to the percentage increase, during the most recent 12-month or 4-quarter period ending before the time of determining such annual adjustment, in the housing price index maintained by the Director of the Federal Housing Finance Agency (pursuant to section 1322 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4541)). If the change in such house price index during the most recent 12-month or 4-quarter period ending before the time of determining such annual adjustment is a decrease, then no adjustment shall be made for the next year, and the next adjustment shall take into account prior declines in the house price index, so that any adjustment shall reflect the net change in the house price index since the last adjustment. Declines in the house price index shall be accumulated and then reduce increases until subsequent increases exceed prior declines.’
(2) HIGH-COST AREA LIMIT- Section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)) is amended by adding after the period at the end the following: `Such foregoing limitations shall also be increased, with respect to properties of a particular size located in any area for which 115 percent of the median house price for such size residence exceeds the foregoing limitation for such size residence, to the lesser of 150 percent of such limitation for such size residence or the amount that is equal to 115 percent of the median house price in such area for such size residence.'.
(3) EFFECTIVE DATE- The amendments made by paragraphs (1) and (2) of this subsection shall take effect upon the expiration of the date described in section 201(a) of the Economic Stimulus Act of 2008 (Public Law 110-185).
(c) Sense of Congress- It is the sense of the Congress that the securitization of mortgages by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation plays an important role in providing liquidity to the United States housing markets. Therefore, the Congress encourages the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation to securitize mortgages acquired under the increased conforming loan limits established under this Act.
(d) Housing Price Index- Part 2 of subtitle A of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4541 et seq.) is amended by inserting after section 1321 (as added by section 1123 of this Act) the following new section:
`The Director shall establish and maintain a method of assessing the national average 1-family house price for use for adjusting the conforming loan limitations of the enterprises. In establishing such method, the Director shall take into consideration the monthly survey of all major lenders conducted by the Federal Housing Finance Agency to determine the national average 1-family house price, the House Price Index maintained by the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development before the effective date of the Federal Housing Finance Regulatory Reform Act of 2008, any appropriate house price indexes of the Bureau of the Census of the Department of Commerce, and any other indexes or measures that the Director considers appropriate.'.
Sec. 1338 Establishment of a Housing Trust Fund managed by HUD and funded by allocations from the agencies. Funds are to be used to increase and preserve housing for low and very-low income families including the homeless. Excessive amounts in this fund will be used to repay the Treasury.
Sec. 1133 Director has the right to re-organize HUD employees previously working under the Federal Housing Enterprise Financial Safety and Soundness Act of 1992 as needed, and the Act outlines the employee rights and Director authority.
Sec. 1151 & 1156 Enforcement Actions outlined with the Civil and Criminal penalties. Civil penalties for knowingly selling loans that violate the guidelines to regulated agencies may accumulate up to $2,000,000, and criminal penalties for participating directly or indirectly may be fined up to $1,000,000, imprisoned for not more than 5 years, or both.
Title II – Federal Home Loan Banks
Outlines the different functions and responsibilities of the new division. Very detailed with expectations and reporting requirements.
Title III – Transfer of Functions, Personnel, and Property of OFHEO and the Federal Housing Finance Board
Outlines the changing of the employees and responsibilities in the new department to oversee FNMA and FHLMC and HUD.
Title IV – HOPE for Homeowners Act of 2008 (Projected to assist 400,000 homeowners remain in their homes with affordable payments and stabilize the lenders’ portfolio values. Won’t help everyone but a few, will it be enough? The future will tell. http://www.hud.gov/fha/home080730.cfm HUD website for homeowners to inform them about the program.)
This is a Federal Housing Administration (FHA) volunteer participation program designed to
HOPE program requirements for an eligible refinance mortgage:
Five Year Phase-In for Equity as a Result of Sale or Refinancing – Upon any sale or subsequent refinance with respect to any equity created as a direct result of such sale or refinancing:
Within one year 100% of equity, the Secretary shall be entitled to the equity,
Within one-two years the Secretary shall be entitled to 90% and the mortgagee shall be entitled to 10%
Within two-three years the Secretary shall be entitled to 80% and the mortgagee shall be entitled to 20%
Within three-four years the Secretary shall be entitled to 70% and the mortgagee shall be entitled to 30%
Within four-five years the Secretary shall be entitled to 60% and the mortgagee shall be entitled to 40%
After five years the Secretary shall be entitled to 50% and the mortgagee shall be entitled to 50%
The Lender with access to this program must be an approved financial institution or mortgagee approved by the Secretary under section 203 as responsible and able to service mortgages responsibly. Handled on case-by-case with current appraisal and full qualifying review. Premium pricing may be used to cover costs of loan for borrower.
Borrower has to pay an annual mortgage insurance premium for the program of 1.5% of the principal balance. (Did not say if the lender will escrow to ensure this is paid, but I assumed they will. However, the monthly fee would have to adjust annually as is based on the outstanding principal balance, so is not constant like standard FHA program MMI.)
Title V – Secure and Fair Enforcement for Mortgage Licensing Act of 2008 or S.A.F.E. Mortgage Licensing Act of 2008
1502. Designed to increase uniformity, reduce regulatory burden, enhance consumer protection, and reduce fraud, but establishing a Nationwide Mortgage Licensing System and Registry for the residential mortgage industry. States through the American Association of Residential Mortgage Regulators and Conference of State Bank Supervisors in charge of establishing the Nationwide Mortgage Licensing System and Registry.
A non-traditional mortgage product is any mortgage product other than a 30 year fixed rate mortgage.
This is the exact description of a Loan Originator per the Act:
(3) LOAN ORIGINATOR-
(A) IN GENERAL- The term `loan originator'--
(i) means an individual who--
(I) takes a residential mortgage loan application; and
(II) offers or negotiates terms of a residential mortgage loan for compensation or gain;
(ii) does not include any individual who is not otherwise described in clause (i) and who performs purely administrative or clerical tasks on behalf of a person who is described in any such clause;
(iii) does not include a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with applicable State law, unless the person or entity is compensated by a lender, a mortgage broker, or other loan originator or by any agent of such lender, mortgage broker, or other loan originator; and
(iv) does not include a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in section 101(53D) of title 11, United States Code.
(B) OTHER DEFINITIONS RELATING TO LOAN ORIGINATOR- For purposes of this subsection, an individual `assists a consumer in obtaining or applying to obtain a residential mortgage loan' by, among other things, advising on loan terms (including rates, fees, other costs), preparing loan packages, or collecting information on behalf of the consumer with regard to a residential mortgage loan.
(C) ADMINISTRATIVE OR CLERICAL TASKS- The term `administrative or clerical tasks' means the receipt, collection, and distribution of information common for the processing or underwriting of a loan in the mortgage industry and communication with a consumer to obtain information necessary for the processing or underwriting of a residential mortgage loan.
(D) REAL ESTATE BROKERAGE ACTIVITY DEFINED- The term `real estate brokerage activity' means any activity that involves offering or providing real estate brokerage services to the public, including--
(i) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property;
(ii) bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property;
(iii) negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property (other than in connection with providing financing with respect to any such transaction);
(iv) engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and
(v) offering to engage in any activity, or act in any capacity, described in clause (i), (ii), (iii), or (iv).
(4) LOAN PROCESSOR OR UNDERWRITER-
(A) IN GENERAL- The term `loan processor or underwriter' means an individual who performs clerical or support duties at the direction of and subject to the supervision and instruction of --
(i) a State-licensed loan originator; or
(ii) a registered loan originator.
(B) CLERICAL OR SUPPORT DUTIES- For purposes of subparagraph (A), the term `clerical or support duties' may include--
(i) the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and
(ii) communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms.
There are two types of Loan Originators per the Act –
Registered Loan Originator – employee of a depository institution or a subsidiary of a depository institution. They will register and maintain a unique identifier (permanent number assigned) through the Nationwide Mortgage Licensing System and Registry.
State Licensed Loan Originator – individual who is a loan originator or not an employee of a depository institution or subsidiary of a depository institution. They will register and maintain a unique identifier (permanent number assigned) through the Nationwide Mortgage Licensing System and Registry.
Sec. 1504 The system will not use social security numbers, only the individual’s unique identifier assigned number. The states are required to monitor and ensure no person is engaging in the business without first obtaining and maintaining the registration annually. Loan Processors, Independent Contractors, and Underwriters may not represent to the public in any form or means information or perform any activities of a loan originator unless they are State-licensed and registered in the Nationwide Mortgage Licensing System and Registry.
Sec. 1505 Loan originators will be subject to criminal history background check, fingerprints, personal history and experience, and credit report. Minimum standards are outlined in Section 1505.b.
Pre-Licensing Education of Loan Originators – a minimum of 20 hours of education approved in accordance with paragraph 2 with at least 3 hours of federal law and regulations, 3 hours of ethics, and 2 hours of training related to lending standards for non-traditional mortgage products.
Testing of Loan Originators – To meet the test requirement the individual shall pass a qualified written test developed by the Nationwide Mortgage Licensing System and Registry and administered by an approved test provider.
Continuing Education Requirements for State-Licensed Loan Originators – shall complete 8 hours of education, which includes 3 hours of Federal Laws, 2 hours of ethics, and 2 hours of training related to lending standards for the non-traditional mortgage product.
Division B – Foreclosure Prevention Act of 2008
Sec. 2002 Emergency Designation of provisions is pursuant to concurrent resolution for the fiscal year 2008.
FORECLOSURE PREVENTION ACT OF 2008
Title I – FHA Modernization Act of 2008
Subtitle A – Building American Homeownership Act of 2008
Sec 2112 Sets standards for the maximum loan amount. 1 family residence 115% of median price in area. 2-4 family residences bears the same ratio to median comparable house price. Maximum principal loan amount may not exceed 100% of the appraised value of the property.
Sec. 2113 Cash Investment Requirement and Prohibition of Seller-Funded Down Payment Assistance
The cash investment from the borrower is increased from 3% to 3.5% of the appraised value. Family members my loan the borrower the money if secured by a lien against the property that is subordinate to the mortgage and the two principal amount of the liens may not exceed 100% of the appraised value plus any initial service charges, appraisal, inspection, and other fees in connection with the mortgage. No one that financially benefits from the transaction may loan the borrower the money. (This provision will still allow the 100% financing that many lenders are complaining they are losing with the loss of down payment assistant programs, but makes the homeowner responsible for and qualified for 100% financing. Since the family member has no interest in the property it will keep the sales price reflective of the market value. The need to have a family member that is willing to LOAN the borrower the 3% down payment, which will be the trick!)
Prohibited sources may not be provided in whole or part by any of the following parties before, during, or after closing:
Sec. 2114 Mortgage Insurance Premiums
The Mortgage Insurance Premiums will be raised from 2.25% to 3% and 2% to 2.75%.
Change in insurer to the Mutual Mortgage Insurance Fund (MMIF).
Removes General Insurance Fund (GIF) and condominium mortgage from application of premium requirements (leaving only MMIF mortgage subject to such requirements)
Sec 2115 Rehabilitation Loans 203K
Makes permanent the authority of the Secretary to insure 1-4 family primary residences loans for rehabilitation.
Sec 2117 Insurance of Condominiums
Requires condominium projects insured by HUD to have a HUD insured blanket mortgage. Defines mortgage to include single family condominium unit in multi-family projects.
Sec 2118 Mutual Mortgage Insurance Fund
Revises requirements governing the MMIF. Limits commitments for loan guarantees to those specified in appropriations Acts. Requires an annual independent actuarial study of the Fund, which will be reported to Congress.
Sec 2119 Hawaiian Home Lands and Indian Reservations
Revises requirements for single-family mortgage insurance on Hawaiian home lands and on Indian Reservations to replace the GIF with the MMIF as the obligated Fund.
Sec 2121 Insurances of Mortgages
Redefines “home mortgage” and “mortgage” in connection with cooperative housing projects to include a subordinate mortgage.
Sec 2122 Home Equity Conversion Mortgages
Require adequate counseling by an independent third party.
Counselors must meet the qualification standards and counseling protocols established by the Secretary.
Repeals the mandatory waiver of upfront premiums for mortgages that fund long-term care insurance.
Allows HECM loans on cooperatives, purchase 1-4 family based on equity and owner occupancy.
Prohibits mortgage originators from participating or associating with or employing any party that is involved with any other financial or insurance activity. Mandates the mortgagee will maintain safeguards designed to ensure that the mortgage origination participants have no involvement with or incentive to provide the mortgagor with any other financial or insurance product, and the mortgagor shall not be required to purchase any other financial or insurance product in relation to the loan.
Requires all mortgage origination participants in a HUD-insured mortgage to be HUD-approved.
The Secretary is to study consumer protections and set standards for limits on origination fees. Estimated $6,000 or 2% up to $200,000, but no final rule has been set as of 8-1-08.
Directs the Comptroller General to study and report to Congress on the costs and availability of credit under the HECM for elderly homeowners program.
Sec 2123 Energy Efficient Mortgage Program
Amends the Energy Policy Act of 1992. Modifies the maximum permissible costs of cost-effective energy efficiency improvements, and prohibits the aggregate number of mortgages insured under the Energy Efficient Mortgages Pilot Program to not exceed 5% of the 1-4 family HUD insured mortgages in a fiscal year.
Sec 2124 Pilot Program for Automated Process for Borrowers without Sufficient Credit History.
Five year pilot program to make mortgages available on an automated process for providing alternative credit rating information for mortgagors who have insufficient credit histories to determine creditworthiness. The Comptroller General is to study and report to Congress to identify the number served and impact of the process upon the safety and soundness of the insurance funds under FHA.
Sec 2125 Homeownership Preservation
Requires the Commissioner of FHA to develop and implement a plan to improve the FHA loss mitigation process and report the finding to Congressional committees.
Sec 2127 Post Purchase housing counseling eligibility improvements
Amends the Housing and Urban Development Acts of 1968. Allows eligibility for home ownership counseling for mortgagors who cannot meet their required mortgage payments due to a reduction in homeowner’s income due to divorce, death; or significant increase in basic expenses due to medical expenses, specific property damage not covered by insurance, or large property tax increase.
New eligibility for the homeowner’s annual income may not exceed the limits set for low or moderate income families.
Sec 2128 Pre-purchasing homeownership counseling demonstration
Requires the Secretary to establish and test the effectiveness of pre-purchase homeownership counseling over the next three years. Homeownership counseling may be given in many forms approved by the Secretary at his discretion. The study should track the delinquency and foreclosure rate for eligible first time homebuyers with a LTV ratio between 97 and 98.5% to determine the counseling effectiveness.
Sec 2129 Fraud Prevention
Amends federal criminal law to be subject to criminal penalties for knowingly making false statements, as well as willful overvaluations of land, property, or security, made to the FHA in connection with an insurance agreement or application for insurance or a guarantee, as well as other specified financial transactions.
Sec 2133 Moratorium on implementation of risk-based premiums
Puts a 12 month moratorium beginning October 1, 2008, upon implementing the risk-based mortgage insurance premiums that went into effect July 14, 2008.
Subtitle B – Manufactured Housing Loan Modernization Act of 2008
In summary, designed to enable adequate financing for manufactured housing and increase the loan limits which were last increased in 1992. Established underwriting criteria for loans to ensure minimal financial losses for the financial institutions. Defines the sale of a manufactured home financed with an FHA insured loan is subject to RESPA and prohibited against kickbacks, unearned fees, and deceptive practices. Revises the manner in which HUD will dispose of properties acquired with payment of insurance to lender.
Title II Mortgage Foreclosure Protection for Service members
Sec 2201 Sets temporary increase through December 31, 2008 in the maximum guaranty amount for certain housing loans guaranteed by the VA (the FHLMC loan limit or 125% of the median single family home price)
Sec 2202 Allows credit counseling or home mortgage counseling for members of the armed forces returning from service abroad to prevent or forestall mortgage foreclosures.
Title III – Emergency Assistance for the Redevelopment of Abandoned and Foreclosed Homes
Sec 2301 Appropriated money from the Treasury for the States to use for redevelopment of abandoned and foreclosed residential homes. The distribution will be formulated based on the greatest need and the greatest number of home in foreclosure or delinquency. The funds may be used to purchase and redevelop abandoned and foreclosed home and residential properties, with emphasis in low (50% of median income) to moderate income areas. All funds may not be used for individuals that exceed 120% of the area median income. The State has some ability to offer financing mechanisms such as soft-seconds, loan loss reserves, and shared-equity loans for low and moderate income homebuyers. States have fund to purchase homes for a discount, rehabilitate or rebuild homes to sell or rent. (You need to let your home improvement and remodeling contractors know about this provision! However they are not eligible to participate if they have been indicted for a violation under federal law or employ individuals who have been indicted for such violations.)
Sec 2305 Counseling Intermediaries
Allocation to assist low and moderate income families with counseling or attorneys to handle legal issues directly related to the homeowner’s foreclosure, delinquency, or short sale.
Title IV – Housing Counseling Resources
Sec. 2401 Allocated funding for the Neighborhood Reinvestment Corporation (NRC) to remain available until December 31, 2008 for foreclosure mitigation. (here is the link for Hope Now program on the HUD website for consumers https://www.efanniemae.com/sf/refmaterials/hudmedinc/index.jsp?from=hp. The also have a hotline available for consumers 888-995-HOPE.)
Sec. 2402 Credit Counseling
Provides entities approved by NRC to provide statewide toll-free foreclosure prevention hotlines. Facilitate or offer free assistance to help homeowner s to understand their options, negotiate solutions, and find the best resolution for their particular circumstances.
Title V – Mortgage Disclosure Improvement Act of 2008
Sec. 2502 Enhanced Mortgage Loan Disclosures
Amends the Truth-in-Lending Act for additional disclosures which applies to any extension of credit that is secured by the consumers dwelling, not just mortgages.
Requires the disclosures to:
The borrower for emergency purposes may waive the three day requirements for bona fide personal emergency that is documented in a written letter from the consumer. All borrowers on the loan must sign the letter. (NOTE: if history repeats itself, abuse of this feature will cause it to go away. So please do not abuse or we loose it! We use to be able to waive the 3 day right of rescission for refinance transactions, but it was abused and we lost the ability to waive.)
Disclosures become required 12 months after enactment of this Act or compliance date established by the regulating Board.
Increases the damages a creditor is liable for with noncompliance with the Act. Replaces current range of $200 to $2000 to a range from $400 to $4,000.
Amends Federal Home Loan Bank (FHLB) Act to permit for two years financing to refinanced loans secured by first mortgages of primary residences for households at or below 80% of the median income for the area. HUD user link for median income http://www.huduser.org/datasets/il.html
Title VI – Veterans Housing Matters
Sec. 2601 Home Improvements and Structural Alterations for Disabled Members of the Armed Forces Before Discharge or Release from the Armed Forces.
Armed forces members determined to be disabled permanently from the line of duty in active military, naval, or air service, the Secretary may furnish improvements and structural alterations for such member for such disability or as otherwise described in the Act. Severely burned veterans have special provisions. Max assistance limits were raised for these purposes.
Sec. 2602 Eligibility for Specially Adapted Housing Benefits for Armed Forces residing outside the United States or residing temporarily with family members is extended to 12/31/2011 and allows access to the benefits under this Act. Lots of details and parameters with this program, and further clarification coming from the Secretary of Veterans Affairs.
Title VIII-Housing Preservation
Addresses public housing, enhanced voucher assistance for low-income residents, and project approvals.
Title IX – Miscellaneous Homeless Assistance – emergency assistance and funding allocations.
Sec. 2902 Increasing Access and Understanding of Energy Efficient Mortgages
The Secretary is to develop recommendations to eliminate the barriers that exist to increasing the availability, use, and purchase of energy efficient mortgages. Develop an educational outreach campaign to inform and educate consumers, home builders, residential lenders, and other real estate professionals on the availability, benefits and advantages of improved energy efficient housing and energy efficient mortgages.
Division C
Title I – Housing Tax Incentives
Subtitle A – Multifamily
Part I – Low Income Housing Tax Credit
Part II – Modifications to Tax-Exempt Housing Bond Rules
Part III – Reforms Related to the Low-Income Credit and Tax-Exempt Housing Bonds
Subtitle B – Single Family Housing
Sec 3011 First-Time Homebuyer Credit
One-time tax credit for the purchase of a primary residence for first-time homebuyer (owned no home for last 3 years) for 10% tax credit of the purchase price up to $7,500. Must purchase and close between 4/9/08 and 7/1/09. (This incentive is viewed more as an interest free loan since it has to be repaid over the next 15 years in equal payment installments starting in tax year 2010.) If they sell the property for no profit the tax credit is forgiven. If sold with profit, the tax credit must be repaid in full.
Credit is tiered based on single or married, and income limits.
Then tiers to how much with partial credits.
(Established to stimulate the first-time homebuyer market and increase demand from a new sector not in the market today. Also will off set the loss of the down payment assistance programs that are now barred from FHA programs. Great pitch to market First Time Homebuyers and get them to purchase a home today. Market is low, rates are low, and now a tax credit. Bringing new buyers into the market will help to stimulate and stabilize the market. Those that do not have the money can be put on a savings plan to accumulate the down payment. In the past before down payment assistance programs, spring was always a big push for purchases from first time homebuyers as they would use their tax refund to supply them the funds needed to close the loan. I suspect this will be the case again come spring 2009, if marketed right by loan originators.)
Subtitle C – General Provisions outlined
Title II – Reforms Related to Real Estate Investment Trusts - REIT Diversification and Empowerment Act of 2008
Amends IRS code for REITs to increase from 20% to 25% with sunset of 5 years. Several areas covered concerning foreign currency, subsidiaries, dealer sales, and health care RIETs qualifying income. Dealer Sales reduce 4 to 2 years safe harbor holding period and allows 10% of aggregate bases on all assts in REIT or 100% of the aggregate fair market value in REIT.
Title III – Revenue Provisions
Sec. 3081-3094 General provisions and revenue offsets covered.
Gives tax breaks to many areas including net-operating loss carry over, and qualified mortgage bond proceeds to refinance subprime residential mortgage.