Federal Housing Response

1. Federal Housing Response JERRY NAGY & MEGAN BOOTH NATIONAL ASSOCIATION OF REALTORS®

2. Federal Housing Programs • FHA • Loan limits equal to 125% 2008 median home price – up to $729,750 • 3.5% downpayment – 6% seller concessions allowed • MIP = 1.75 upfront/.5-.55 annual/1.50 refi • No minimum credit score • Loan limits – https://entp.hud.gov/idapp/html/hicostlook.cfm • VA • Loan limits equal to 125% 2008 median home price – up to $1,094,625 • Zero-downpayment • Fees = 2.15% on zero-down (3.3% for repeat) – no fee if service-connected disability • No minimum credit score • Loan limits - http://www.homeloans.va.gov/docs/2009_county_loan_limits.pdf • RHS • Income eligible up to 115% local area median income • Flexible downpayment (including zero-down) • Eligible areas - http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

3. Specific Loan Programs • 203k rehabilitation mortgage • FHA • Energy Efficient Mortgages • FHA • Freddie Mac/Fannie Mae • Location Efficient Mortgages • Freddie Mac/Fannie Mae • HECM • FHA • HECM for Purchase • FHA

4. Homebuyer Tax Credit • $8000 Tax Credit for first time homebuyers* *may not have owned a home in previous 3 yrs • Any single family residence (including condos and coops) that is a principal residence • Income Limits ($75,000-$95,000/$150,000-$170,000) • Recapture if sold in first 3 years • Effective January 1, 2009 – November 30, 2009

5. Use of the Tax Credit • According to 2008 IRS Tax Tables • A single filer would need $46,600 in taxable income to have an $8,000 tax liability • A couple would need $58,600 in taxable income to have $8,000 in tax liability • The median household income in 2007 was $50,233.00

6. Examples of the Tax Credit Example #1 Example #2 • Nick and Nora file a joint return. Withheld= $11,000 Actual Tax Liability = $9,800 Homebuyer Tax Credit = $8,0000 • Result: $1,200 regular refund + $8,000 tax credit = refund of $9,200 • Cesar and Maria file a joint return. Withheld = $5,000 Actual Tax Liability == $7,200 Homebuyer Tax Credit = $8,000 • Result: Owe $2,200 additional, + $8,000 tax credit = $5,800 refund.

7. Homeowners in Trouble • Hope for Homeowners • GSE Refinancing • GSE Loan Modification • Other Resources 1 888 995 HOPE (4673)

8. HOPE for Homeowners (H4H) • Updates being debated in Congress • Effective October 1, 2008 • Voluntary for lender and homeowner • New loan at 90% (93%) current appraised value • FHA must approve loans and borrowers • National loan limit of $550,400 • (Incentives to lenders/servicers) • More information at www.fha.gov/hopeforhomeowners

9. GSE “Responsible Homeowners” Refinancing • Will allow refinancing for families who owe more than 80% the value of their home • Designed for those making on-time payments, but have had their home value fall • Loans must be for less than conforming loan limit • Estimated to help 4-5 million homeowners

10. GSE “Responsible Homeowners” RefinancingEXAMPLE • In 2006, the family took out a 6.5% 30-year fixed rate mortgage for $207,000 on a house appraised at $260,000. • Home is now worth $221,000, and they owe $200,000. • They would have a hard time refinancing because they don’t have 20% equity. • They could refinance into today’s rates (near 5.1%), reducing their annual payment by $2,300.

11. Homeowner Stability Initiative • For homeowners who are at risk of foreclosure • Shared effort to reduce mortgage payments • Lender must reduce interest rate, so that the payment is no more than 38% of income • Federal government will further reduce interest rate to bring the ratio down to 31% • Interest rate stays low for 5 years, then gradually increased up to conforming rate at time loan was made • Payment incentives to homeowners to reduce principal (up to $1000/year) for up to 5 years • Incentives for servicers to participate and for lenders/servicers to reach borrower before delinquent • Partial guarantees • Guidelines for Loan Modifications

12. Example of Homeowner Stability Initiative • In 2006, the family took out a 7.5% 30-year subprime mortgage of $220,000 on a home worth $230,000. • Today they owe $213,431, but their home is only worth $189,000. One member of the family also had had their working hours reduced, lowering their income.

13. What do Homeowners Do? • As of March 4, the programs are available • The information a homeowner will need to provide: • #1- call lender and ask if you are Freddie/Fannie Loan • Gross monthly income of all borrowers, including pay stubs • Most recent income tax return • Information about any second (or third) mortgages • (only the first mortgage will be modified) • Payment information on all credit cards • Any payments on other loans (student, car)

14. CDBG – Neighborhood Stabilization Program • $4 billion allocated to states/localities based on foreclosure rate, # of subprime mortgages, # homes in default or delinquency – additional $2b allocated in ARRA – competitive bid • Funds provided through the CDBG Program • Funds used to: • Provide financing • Purchase • Manage • Repair • Resell foreclosed and abandoned properties • Homes must be: • used to assist individuals and families with incomes at or below 120% of area median income. • Twenty-five percent of funds must be used for households with incomes at or below 50% of area median income.

15. Resources for More Information • www.realtor.org/governmentaffairs • www.fha.gov