The good news is that under the Housing and Economic Recovery Act of 2008 will create a tax credit for first time buyers of $7,500. This tax credit is repayable over 15 years. ( thus making it an interest free loan) A first time buyer is defined as someone who has not bought a home in the last 3 years. This is good.
The act prohibits sellers or anyone with a financial stake in the transaction from participating in buyer down payment assistance programs. I understand why. It was routine practice that when a buyer needed down payment assistance the seller would inflate the price by 3% so that they could pay the down payment assistance for the buyer. This artificially inflated the price. The buyers had no skin in the game. And the lenders were left holding the bag when buyers skipped out on mortgages like bad tenants skip out on rent.
FHA foreclosure rescue– this provides for the development of a refinance program for homebuyers with subprime loans. Lenders would write down up to 85% of current appraised value and qualified buyers would get a new mortgage of 90% of appraised value. The buyers would then have to share with the FHA 50% of all future appreciation. At least they are requiring some sort of payback. This is estimated to help over 400,000 home owners.
For a full list of HR 3221 provisions go to
http://www.realtor.org/gapublic.nsf/pages/hr_3221_key_provisions?OpenDocument
The issue here is that power players in Washington are very anti- regulation. As an entrepreneur, I don’t want to be overly regulated. A government is supposed to provide safeguards for the people. The heads of the lending institutions were making money hand over fist by making these loans. They were making money off the bundling of these loans and the securitization of mortgage instruments. They were left unchecked by appropriate regulation. We need regulation. The problem is that this is a little too little and a little too late.
