Housing and Economic Recovery Act of 2008

There is a new Act that is being implemented in order to help people keep their homes. The Housing and Economic Recovery Act of 2008 is estimated to help hundreds of thousands of American homeowners keep their homes by giving them refinancing options they did not have before.

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Loan Type: Home Purchase FHA Refinance

Property State:

Some of the details of the Housing and Economic Recovery Act of 2008 include:

  • The FHA will insure more mortgage in order for people to refinance their homes. They will do this by offering mortgage guarantees to those lenders who are willing to reduce mortgage loans for those in crisis due to default or an impending foreclosure.
  • The current lenders will be paid up to 90% of the value of the home, depending on the current mortgage. Then the new FHA approved lender which the homeowner will refinance through, will hold the new mortgage on the home for a lesser payment.
  • This helps the homeowner by allowing them to refinance to a lower interest rate on a fixed rate mortgage loan with a lower monthly payment that they can afford.
  • You can only participate in this new program if you are a residential homeowner. Real estate investors can not refinance investment properties. This program is only designed to help residential homeowners who are in jeopardy of losing their homes.
  • Since the program only allows a payoff of up to 90% of the current value of the home to the current primary lien holder, the lender will usually take a loss. The value of many homes has dropped and the current value of these homes is worth less that the mortgages due to falling real estate prices in some areas of the country. This is why some lenders will not want to participate in the program.
  • The FHA requires a future percentage of the profits from the building equity of the property in the future. Since the property will undoubtedly be worth more in the future, the FHA will require a percentage of the profit on the home to be paid to the FHA so that they can recoup the money they spend on the program.
  • This new law also raises the loan limits to $625,500 to allow homeowners in certain high cost of living areas of the country to also benefit from the programs.
  • The law also gives a $1,000 tax deduction for property taxes to married homeowners and $500 to single homeowners.
  • First time buyers also get a tax credit.
  • Another aspect of this new law is that it creates more affordable housing for low income families or those families that are have economic difficulties and have to relocate to less expensive housing. Freddie Mac and Fannie Mae are funding the construction of rental housing for families in need.
  • They are also temporarily increasing the Low-Income Housing Tax Credit.
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All of these aspects of the Housing and Economic Recovery Act of 2008 will help families keep their homes through financial difficulties, and help families who have already lost their homes get more affordable housing. For more information on the Housing and Economic Recovery Act of 2008 go to the HUD website.

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