Details of the Economic Stimulus and Homeowner Affordability and Stability Plans

Details of the Economic Stimulus and Homeowner Affordability and Stability Plans

It’s been a busy few weeks for our members of Congress and President Obama. Faced with high unemployment and an ailing economy and housing market, the pressure was on for our elected officials to act quickly and provide the American public with a solution to jump start the economy.

After much debate, Congress passed and President Obama signed the American Recovery and Reinvestment Act of 2009, otherwise known as the $780 billion economic stimulus package. The bill is intended to aid the economy, while also providing some much needed help for the housing market. The key provisions of the bill for the housing market include:

1) First Time Homebuyer Tax Credit
The bill provides for an $8,000 tax credit for first time homebuyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The purchaser and purchaser’s spouse may not have owned a principal residence in the three years prior to purchase.

The full amount of the credit is available for individuals with a gross income of no more than $75,000 or $150,000 if filing jointly. Unlike the $7,500 tax credit, this credit DOES NOT have to be paid back.

Click here for a side-by-side comparison of the 2008 $7,500 tax credit and the revised $8,000.

2) Reinstate Higher Loan Limits for FHA, Fannie Mae and Freddie Mac
The bill reinstates last year’s 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. For the few areas where the 2009 limits were higher, the higher limits will apply. In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any sub-area, i.e. an area smaller than a county. The Secretary’s discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

By reinstating these higher loans limits, mortgages in high-cost areas will be easier to obtain and will also help reduce inventory and improve liquidity in the overall mortgage market.

Additional components of the stimulus package include:
Neighborhood Stabilization
Commercial Real Estate
Rural Housing Service
Low Income Housing Grants
Tax Exempt Housing Bonds
Energy Efficient Housing Tax Credits & Grants
Transportation Investments
Broadband Deployment

Click here to read more about these components.

In addition to the economic stimulus package, President Obama announced his Homeowner Affordability and Stability Plan, designed to offer assistance to seven to nine million homeowners who are making a good faith effort to stay current on their mortgage payments. The three main components of Obama’s plan include:

1. GSE Refinancing for Responsible Homeowners Suffering from Falling Home Prices
Fannie Mae and Freddie Mac (government sponsored enterprises, or GSEs) will refinance mortgages for four to five million responsible homeowners with loans owned or guaranteed by the GSEs. The streamlined refinancing program is designed to help borrowers with loan-to-value ratios above 80 percent up to 105 percent.

2. A $75 Billion Homeowner Stability Initiative to Reach up to 3 to 4 Million At-Risk Homeowners
The goal of the 3-year Homeowner Stability Initiative is to reduce the monthly payment of homeowners to affordable levels using $75 billion from Troubled Assets Relief Programs (TARP) and the GSEs. The program will be available for home owner-occupants “at risk of imminent default” even if they are current in making mortgage payments, as well as those already delinquent. It will only apply to mortgages at or below the GSE conforming loan limits.

Click here  for a detailed explanation on how this initiative works.

3. Support Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac
The Treasury Department is doubling, from $100 billion to $200 billion for each GSE, its pledge to invest money to make sure that the GSEs maintain a positive net worth. This will further assure that the federal government is committed to maintaining the mission of the GSEs.

For more information go to

Source – National Association of REALTORS®; U.S. Department of Treasury

2 Responses

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