President Bush signed the big housing bill into law yesterday. While I have already discussed the bill extensively in earlier posts, here is a summary of a few provisions that I think are relevant to your business:
- Sellers to refinance to avoid foreclosure. 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.
Some investors have whined that this will “take Short Sales away from us”. Grow up and stop whining. There are close to 3 Million expected foreclosures coming down the pipeline and this new program is expected to at most help about 400,000 of them. The short-refinances will only apply to owner occupied houses where the seller wants to stay in the house and can demonstrate the ability to make payments going forward – these shouldn’t be the people you are talking to anyway.
This is such a minority of the situations that I see in reality. The deals that work come about when a Seller wants out, cannot afford to stay, and will cooperate to facilitate the Short Sale. Since the day I wrote my first book on Short Sales, if the seller wants to stay in the house – I’ve always said – stay away – there is no role for an investor or agent when a Seller wants to stay in the house. If you would like some more information on “Short Sales Basics according to Ben”, just ask for my FREE CD and we’ll send it right out.
- 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. This could be good for investors and agents as it might incent some new first time homebuyers.
- 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. The law would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans. Whatever they gave to the market by providing home-buyer credit discussed above, they just took away with a ban on down-payment assistance. This will hurt new home buyers. But remember, it only applies if your buyer is using an FHA loan.
- The Big Bailout! The new law provides grants to states to buy foreclosed properties. The law grants $4 billion to states to buy up and rehabilitate foreclosed properties. This is simply stupid – see earlier posts.
- The Big Blank Check. The new law provides temporary authority for the Treasury to lend a financial hand to Fannie Mae and Freddie Mac if the Treasury deems it necessary to help stabilize markets. The law includes provisions that let Treasury offer Fannie and Freddie an unlimited line of credit and buy stock in the companies. The provisions expire in 18 months.
It is my sincerely hope that these measures help improve our nation’s economy and the housing market. Yes, I believe that that a better housing market will ultimately be better for all of us – investors and agents alike. However, I do not believe the government can do much to fix it. The housing market must heal itself and the pain in the marketplace is part of the cure.
There is a tremendous opportunity right now to help people and make a lot of money helping the market correct itself. (Because unlike stocks the housing market does not moves without you and me facilitating the correction one house, one loan, and one family at a time.
For more on Short Sale and how they can be used to make money while facilitating the market correction, just ask for my FREE CD Short Sale Basics.
