Housing Bill Pros and Cons, Bush to Sign It After Senate Vote
Attorney
(866) 735-1102 Ext 385
Whether people agree or disagree with the Housing Bill that was passed by the House on Wednesday, and is expected to be passed by the Senate next week, every homeowner, including homeowners barely affected by the foreclosure crisis and/or potential homeowners, should look at some of the bill's provisions and see where they stand to benefit.
The New York Times has listed six new benefits that the Housing Bill offers: the ability to renegotiate mortgages, a tax break for first-time buyers, an additional deduction for current homeowners, changes to existing reverse mortgage rules, redefinition of what makes a mortgage a "jumbo" mortgage, and a significant benefit/break for veterans. Below is the list of benefits many current and future homeowners will see, along with some drawbacks to the bill.
Renegotiating Mortgages
Some people will be able to cancel their old mortgages (like teaser rate payment loans with high interest rates) and replace them with new fixed-rate loans lasting at least 30 years. To combat falling housing prices, the new loans would be no more than 90 percent of what the borrower's property is worth currently.
People eligible for this type of loan re-modification must have originated their troubled loan(s) on or before January 1, 2008. The loan must also be on the borrower's primary residence. Income verification is required, which might exclude some subprime borrowers who didn't have to disclose their income to receive their current loan.
Your housing payment has to be at least 31 percent of your monthly household income, in order to renegotiate, and if you manage to get a new loan, you cannot take out a home equity loan for at least five years.
And any appreciation made on the home within five years goes back to the government; 50 percent of any appreciation after five years must go to the government.
First-Time Buyers
The Housing Bill proposes a tax credit for first time home buyers of $7,500 or 10 percent of the purchase price, whichever is smaller, however, the credit is based on income levels and marital status and HAS to be paid back over the next 15 years, in equal amounts each year when federal taxes are due: The credit is more or less an interest-free loan.
The tax credit, though, is retroactive, meaning if you purchased a home on April 9, 2008 or later, you're eligible to file for the tax credit on your 2008 tax return.
Standard Deduction/Additional Deduction
If you're a homeowner who takes the standard deduction when filing taxes, you can now take an additional federal tax deduction of $500 (if you're single) or $1,000 (if you're married and filing jointly).
Reverse Mortgage Benefits
The bill addresses predatory lending practices on borrowers of reverse mortgages, generally Americans that are 62 and older, and caps origination fees. It also raises the maximum amount that people can borrow from $400,000 to $625,500.
Redefinition of Jumbo Loans
Jumbo loans are now considered any loan that is greater than $625,500. If someone needs a loan for more than that dollar amount, the interest will be higher on the loan.
Veterans' Breaks
Good news for veterans: Lenders will have to wait nine months, not 90 days, before beginning foreclosure proceeding on homes owned by someone returning from the military. On top of that, lenders will have to wait a year before raising interest rates on a mortgage held by someone returning from military service.
This Housing Bill will become effective October 1, if President Bush signs it after Senate approval, which he has stated, over the last couple days, that he will.