Housing and Economic Recovery Act of 2008
President signs Housing & Economic Recovery Act of 2008 into bill: Overview
The President signed the Housing & Recovery Act of 2008, H.R. 3221 this week that includes the provision related to the long awaited FHA Modernization Act of 2008. This will enable the FHA to reach more prospective borrowers and allow millions more low- and moderate-income families to achieve the American dream of homeownership.
Below is a high-level overview of the Housing and Economic Recovery Act of 2008 that will provide you with some context on what to expect as a result of the new legislation.
FHA mortgage limits effective January 1, 2009: (loan limits defined in the Economic Stimulus Act of 2008 will remain effective until December 31, 2008)
Permanently increase the floor from 48% to 65% of the government sponsored enterprises (GSE) conforming loan limit.
Permanently increase the ceiling to 100% of the conforming limit.
As always, all FHA loans limits are defined on a county by county basis.
Increased Down payment requirements:
Minimum contribution will increase from 3.0% to 3.5% of the appraised value. Seller funded Down Payment Assistant Programs (“DAPs”) or funds from any other interested party to the transaction will be prohibited on all loans where final credit approval has not been established by September 30, 2008.
Risk Based Premiums:
Up Front and Monthly Mortgage Insurance Premiums implemented on July 14, 2008 will change on October 1, 2008.
Condominiums:
Guidelines for project approval will be relaxed, likely by year end.
Reverse Mortgages (HECM):
Changes to loan limits and origination fees.
HOPE for Homeowners:
Program designed to assist eligible at risk borrowers through refinancing into a new FHA insured loan. Program guidelines yet to be defined by HUD.
Fannie Mae and Freddie Mac’s Conventional Conforming Loan Limits
Permanently increase the maximum loan limit in high-cost areas to $625,500 (150% of the current conforming limits), effective January 1, 2009. The temporary “Conforming Jumbo” limits we previously announced in April under the Economic Stimulus Act of 2008 will expire and all loans must fund by December 31, 2008.