HR 3221: The Housing and Economic Recovery Act of 2008 was signed into law on Monday July 28th 2008. Mike Mueller is from Patagonia Finance in Contra Costa County, Calif.
Mike is a Social Media.ist, Mortgage Expert, Short Sale Negotiator & Speaker with over 14 years experience.
Call me if you would like to talk to a local lender about how this affects you.
IRS Form 5405 First Time Homebuyer Tax Credit
Here is an excellent post from Mike:
The Media can be misleading.
Yeah I know, no surprise there!
But let's talk about HR 3221, H.R. 3221 or if you want to call it by it's really long name, the Housing and Economic Recovery Act of 2008
It was signed into law Monday July 28th, 2008. It was reported all over the world. it's the talk of the town. I've been interviewed on radio shows, quoted in articles and blogs. Ok, now what?
Just about nothing. We're waiting.
There's quite a few facets included in the bill that still need to be hashed out. Here's a quick peek at just some of the facts.
The $7,500 Tax Credit
It's a tax credit (not a rebate). It's for purchases made between April 9, 2008 and July 1, 2009. It's essentially an interest free loan for 5 years that has to be paid back.
Down Payment Assistance Programs
HR 3221 wipes out the ability for down payment assistance on an FHA loan starting October 1, 2008. Think you have till then? Think again. The Lenders are already not allowing DPA on the loans they are accepting.
Skin in the game
FHA used to finance up to 97%. That meant that the buyer had to pony up the other 3%. As of October 1st, under the new rules, the borrower will have to 3.5%.
Reserve Requirements for Second Homes
Thinking about buying a second home? Vacation home? How about Rental Property. It's a great time to find bargains. How much liquid reserves do you have in the bank? There wasn't a minimum reserve requirement before. Now there is.
Have less than 30 % equity in the second home? You'll need to prove you also have 6 months worth of PITI reserves for both properties in the bank (liquid). Yeah I said SIX months! Have more than 30%? You'll just need to prove you have two months reserves.
Capital Gains Exclusion
Are you good at percentages? Remember when you were entitled to $250,000/$500,000 of tax-free gains from the sale of a home if filing separately/jointly provided you lived in the residence for at least 2 of the preceding 5 calendar years? Not any more.
Now that exclusion is calculated by taking the capital gains on the sale of the home and multiplying it by a ratio (percentage) of how long you lived in the home and how long you owned the home.
Loan Limits Increased!
Nope. Matter of fact, depending on where you live, FHA, Fannie and Freddie Conforming Jumbo loans will decrease.
The Mandatory Refinance at 90% of Present Value
I saved the best for last. First of all it's not mandatory. It's actually voluntary on the lenders part. Should a lender decide this is in their best interest, they'll still hold the note. They'll reduce the size of that note to 90% of the present value and that's what FHA will be on the hook for. Then again, nothing here is in concrete. The details still have to be hammered out by HUD. Until that happens, nothing really has changed.
So there you go. You know know more about HR 3221 than the next guy at the water cooler.
What should you do if you think any of these changes will involve you in the future? Contact your trusted mortgage professional today.
Mesquite Nevada Real Estate Agent ~ ~ ERA
Virginia Hepp ~ Mesquite Realtor 
Virginia, I have looked at this subject since it came out and it is indeed a tax credit prorated over several years and not a rebate. Great information here on the whole bill.
Howdy Virginia
Some very good info, for folk's to read and think about.
Explaineding all the details to our clients, is something we all need to do.
Virginia,
I reblogged this post myself. It is a very good summary.
Richard
Gary - Mike explained the details so much better than I - it affects so many people - first time buyers, second home buyers, refinance - I thought it valuable.
Dale, Thanks, there is a lot more to it!
Richard - It is a good summary of the Housing and Economy Recovery Act. I first read Mike's post on your blog.
I am confused by tis Act. I have a client, who is struggling with payments on his primary residence. He has 3 more properties, all of them for sale, and all of them can't be sold, He would love to stay, but won't be able to make payments. When he depletes his Credit cards, he is done.
Tols him about Short sale. He then asked me why not just the Lender modify his loan to the same numbers that the Short sale would. Still is more profitable for the Lender, as they would not need to pay the commission, closing costs, taxes...
I asked attorney Richard Zaretsky, and he said that he tried talking to Lenders on that, and it never worked.
I thought that maybe this Act will help my client, but so far I am not sure, too little information.
Virginia: Thanks for posting this video about the bill. I didn't know and Mike cuts to the meat of it. Not sure how this pans out for real estate sales agents though. I am definitely contacting some of my mortgage folks today to find out more. I'm in a second home market and really need to be on top of my game. (Thanks Mike.)
This is one of the best posts I've seen about this recently passed Act. I'm bookmarking. Thanks for sharing!! GBU!
Jon - maybe it is too general to help everyone?
Donna - I am in a second and retirement home area. Mike has a talent for delivering the facts - and I love his videos - he comes across like he is talking directly to you and his credibility factor is huge. I have learned alot from him.
Elizabeth - As busy and stressed as you have been with getting your 2 angels, I am surprised you are reading blogs at all - of course, we need to catch up. Mike is really good at explaining, isn't he?
This is excellent....Mike has a great way of explaining things.
I'm not too hip on the new capital gains thing though! That's going to make things difficult for property flippers....
IMHO the government has no right to charge you more taxes on something you've been paying property taxes on already, that you paid a real estate transfer tax when you bought it, etc. But nobody put me in charge of real estate taxes.... :(
Karen - The flippers are being pretty cautious these days - I will vote for you for the Boss of real estate tax.