The House just passed a Bill entitled “Housing and Economic Recovery Act of 2008”. It is said as of this writing that the Barney Frank version just given the okay in the House is the piece of legislation that will be passed imminently by the Senate, and that Pres. Bush has now agreed to sign off on.
What is being labeled as an “Act” is really a 694 page collection of provisions that far more resembles a grand smorgasbord of Bills than a clean, coherent piece of public policy. It addresses such basically unrelated issues, for example, as rescuing the entire world economy from the collapse that has been forecast that letting Fanniemae and Freddiemac go under would cause, and ways to help buyers of manufactured homes get better financing and keep from getting ripped off by ethically challenged “trailer house” sales lot. Naturally there are a number of important provisions that have been headline items leading up to enactment. Money is now being made available for localities to buy up and manage distressed homes that are destroying communities, and HUD has been given a new $300 billion authorization to try to help “under water” homeowners refinance their mortgages with FHA loans.
And then we come to some stuff that will basically be of interest only to real estate/finance professionals and would be homebuyers, but that will likely make complete sense to no one. For example, the minimum down payment for buying a home with FHA financing has now been increased from 3% to 3.5%. Also what the industry has euphemistically labeled as “Down Payment Assistance”, or “Nehemiah” programs have been abolished, and, to some extent, the federal government has been assigned to give away free down payments. Nehemiah Foundation found a loophole to facilitate the forbidden act of a home seller giving a down payment to the buyers, but this loophole now closes on October 1st. However, starting with many folks who bought homes as far back as April 9 of this year and stretching until July 1 of next year, there will be a tax credit of up to 10% of the price of the home purchased, capped at $7,500 and scaling down for higher income filers.
A Nehemiah type buyer, then, who used or uses this discredited financing tactic in the window period of 4-9 to 10-1 gets both a free down payment, and a $7,500 tax credit. Folks should take a serious look at getting a piece of this action while it is available.
And then there are two unrelated provisions, one that openly permits FHA borrowers to borrow even their down payment, as long as it comes from a family member, and another that allows the choice for their $7,500 tax credit to be processed on their 2008 tax return even if the home purchase is made during the period from Jan. 1, 2009 through June 30, 2009. This is not exactly like the federal government giving away free $7,500 dollar home purchase down payment grants to most comers, but it is also not very far removed from that either. Buy, file 2008 taxes, or an Amended return and get your down payment returned at tax refund speed. (Borrow it from H&R Block?)
And you read about it on The Democratic Daily first.