Housing Bill: Buyer Credits, Loan Limit Increases, FHA Changes

Breaking news on the latest version of the Housing Bill, now on a fast-track to a vote and onto the President’s Desk, where he has signaled he will sign it. The newest developments:

• Permanently increase the conforming loan and FHA loan limits (previously $417,000, and increased to $729,750 in the Washington, DC, area in 2008) to 115% of the median home value - $625,000 in our area, effective 1/1/09
• Increase the FHA down payment from 3% to 3.5%
• Provide a first time home buyer “credit” (really, more like an interest-free loan, to be repaid over 15 years by the buyer) of up to 10% of a home’s price, to a maximum of $7500. The refund is gradually reduced for single filers with AGI above $75K ($150 for joint). It applies to home buyers who purchased between April 9, 2008 and July 1, 2009.
• Bar down payment assistance programs like Nehemiah
• Allows the Treasury to offer Fannie and Freddie an unlimited line of credit over the next 18 months to serve as a ‘backstop’ and provide liquidity. The bill also creates a regulator for the two companies.
• Gives $4 billion in grants to states to buy and rehabilitate foreclosed homes
• Create an FHA program which will help strapped homeowners who are upside-down. The program will require lenders to write down loans to 90% of the appraised values and pay an FHA fee in exchange for an FHA guarantee. Lenders and FHA would then share in any future price appreciation.

Update 8/10/08: Here are some FAQs, including one important for our answer -- can a DC homebuyer claim both the DC credit as well as the non-interesting bearing loan ("credit")? Unfortunately, no.