FHA offers a set of programs through HUD (Housing and Urban Development). The most recent changes were made October 1 as a part of the HOUSING AND ECONOMIC RECOVERY ACT OF 2008.

The HOUSING AND ECONOMIC RECOVERY ACT OF 2008 eliminated down payment assistance paid by the seller so now the buyers must arrange for their own down payment. Typically this is 3% of the sales price (set to escalate per the HOUSING AND ECONOMIC RECOVERY ACT) to 3.5% after January 2009.

Good news included in the HOUSING AND ECONOMIC RECOVERY ACT OF 2008 is a tax credit. Without representing any tax or accounting law (always check with a professional) the Act allows for up to a $7500 tax credit for a couple buying in 2008 and for part of 2009. If purchased in 2009 it appears the credit is able to be applied  retroactively to a 2008 tax return! The law allows for a credit of half that for a single person.

The TAX CREDIT as dictated by the Act is for people who have not owned a residence in the past 3 years. The Housing and Economic Recovery Act also is intended to help the recovery by the tax credit meaning that even if a person or couple does not owe tax they will actuyally RECEIVE A CHECK for up to $7500.

Again, this is a tax credit not a deduction to reduce taxable income. A major plus and hopefully a stimulus that may make that part of the HOUSING AND RECOVERY ACT OF 2008 successful (whereas other parts, specifically the HOPE FOR HOMEOWNERS section was a total dud. See my posting as to that topic.

NOW UNDERSTAND THIS IMPORTANT ASPECT OF THE TAX CREDIT; The Housing and Economic Recovery Act of 2008 specifies that the tax credit is to be re-paid to the IRS at ZERO INTEREST over a 15 year period. So, in my opinion anyway, it is a 'no-brainer' and I have yet to have a client say they won't jump all over it.

As with any topic, call or e mail me and I will be happy to answer any specific questions you may have. If i don't know the answer I will make every attempt to find the answer.

Many calls come in each day asking if there are any "Zero Down Programs". The answer is a uqalified yes. A great program exists through the "Rural Development Program" offered by the USDA. I say 'qualified' yes as there are income limits wherein a family cannot earn 'too much' (yes, too much, not just too little). Depending on the number of family members there are income maximums. Check with your lender (or me )if you would like to know if you qualify.

The other criteria is that the RURAL DEVELOPMENT PROGRAM has a geographical boundry in each county. USDA.GOV web site posts the areas or, again, call or e mail me and I can explain and tell you which areas work. Generally in Southwest Florida (but keep in mind our company is licensed in all Florida and Tennessee) the following general areas work for THE RURAL DEVELOPMENT PROGRAM: Lehigh Acres, San Carlos Park and North Fort Myers east of approximately SR 31. In Collier County THE RURAL DEVELOPMENT PROGRAM is useable is virtually the entire county. Also THE RURAL DEVELOPMENT PROGRAM is useable in all Hendry County.

The nice features of THE RURAL DEVELOPMENT PROGRAM aside from ZERO-DOWN is that all closing costs and pre-paid expenses (such as homeowners insurance, etc) can be built into the loan.

There are some quirks with this program (would you expect anything less from a government program? ) but there are so many positive aspects to THE RURAL DEVELOPMENT PROGRAM that its popularity is growing by leaps and bounds.
 

This program was passed by Congress and singed by the President back in August. It was to provide for among many things, a way for homeowners that are behind or falling behind and are "upside down" (owing more on the mortgage than the house is worth) to refinance.

It was structured in the law as follows: the existing mortgage holder, or holders if more than one mortgage exists (such as a first mortgage with a line of credit as a 2nd mortgage). had to take 85% of the PRESENT VALUE.

FHA would then offer a refinance at at 90% of the PRESENT VALUE. FHA was to be entitled to a percent of any future profits starting with ALL profit in the 1st year and working to a 50-50 split with the homeowner after 5 years.

GREAT INTENTIONS.... A DUD IN REALITY:

Congress passed this and went home on vacation (as people across the country got news of some possible salvation. Commentary is unavoidable: they had a lot of nerve going home on that vacation while passing a lousy law with no teeth in it. More on the 'teeth' part in a moment)

the law was to become effective Oct 1. Many prior clients and referrals in droves flooded me with calls and many were just heart breaking. But, we just thought wait the regulations were put out by FHA (per the well intended law).

We waited and waited expecting guidelines soon. FHA took until OCT 1 to get them out!  In and of itself not a very speedy thing. And then when they did - after spending who knows how much taxpayer money - the guidelines were almost absurd but wait, that isn't the worst part.


After spending your money and mine promulgating these new guidelines, work that would make an IRS booklet seem like summertime reading, it turns out it was ALL FOR NOTHING!  Here's why: it seems that the (geniuses in) Congress forgot to check one small thing: WOULD THE LENDERS BEING ASKED TO TAKE LESS ACTUALLY  TAKE LESS? Well, as the kids might say "DUH"!!!

So, that was one problem as the lenders being asked to take less (referred to as taking a 'haircut' in finance parlance) . But there was more (no, the Congress wouldn't just do one stupid thing... that would border on efficiency and how often do you get THAT from Congress...sorry for the opinion; couldn't resist but this blog is meant to be informational not opinionated - excessively anyway).

The other thing they left out gets a little complicated; probably why they left it out as they basically have shown no clue as to finance works - witness our current mess from start to their 'solutions'. Let me try to keep it simple:

     Most loans, including FHA are originated by local 'brick and mortar' companies  such as First Capital Lending but we have to transfer these loans, basically to keep funds flowing for the next loan. We don't- or in some cases can't - be 'servicers' (which involves massive dollar amounts to hold them and huge servicing centers, etc).


    So, again, we have to have a source to 'place' or 'sell' these loans. And there was the rub (BUT NOT THE TEETH - remember that  reference?) The 'teeth' in the opinion of we, brick and mortar, originators of the loans was that Congress didn't REQUIRE FHA lenders that buy these loans to be forced to buy these too. So, guess what?

 Those large servicers said ' gee thanks, but umm, we'll pass on buying those', but thanks.

So there we are, Congress creates a masterpiece of,  basically, air, (but pats themselves on their backs as they jet home for 'vacations' and all the while FHA is spending YOUR money putting out worthless guidelines (but heck, at least someone has a job - sorry it was a government bureaucrat telling you how to dot i's and cross t's and not an auto worker in Michigan...) and NOBODY WOULD BUY THE 'HOPE FOR HOMEOWNERS' loans. Yea, so much for that "Housing and Economic Recovery Act of 2008".  Another legislative joke perpetrated by a useless Congress (sorry: opinion alert should have gone out)


Bottom line: The "Hope FOR HOMEOWNERS' (which they actually thought should have the catchy reference of 'HOPE 4 HOMEOWNERS' ....get that clever '4' thing??? yea, impressed me too) was a total DUD. Worthless (except for those bureacrats who probably knocked down some serious overtime), and as useless as a life-preserver with no air in it. 

I have had to relay this sad news to clients many times each day (after many would call - totally understandably, mind you - once a week or more). 


BUT TAKE HEART BECAUSE NOW CONGRESS IS AT IT AGAIN! Yes, they are proposing new bail out programs with no real substance or time frames that i can relay as of this writing. But I will make new posts as I learn them.

In the meantime all I could counsel borrowers in distress is 2 things:

1. CONTACT YOUR PRESENT LENDER AND TRY FOR A WORK-OUT of the existing loan(s). Some have been great, others totally uncooperative. Be ready to be on hold for 40 minutes before you get through to someone. Also, don't be satisfied if the first person you talk to blows you off. Get to a Supervisor. There is no guarantee that will help but it will increase the odds a bit.

2. CONTACT YOUR LEGISLATORS: Insist that the next attempt have some teeth in it. And tell them to actually check with those that they expect to be involved. They can't force lenders to drop rates (as much sense as that may make) but they should try to reach a consesus with them to find an acceptable plan that lenders can swallow.

Also, Congress may be considering "CRAM DOWN" LEGISLATION. Quick explanation: this is where Congress (with the signature of the President on a bill becoming law) authorizes Bankruptcy Courts to have the power to ulilaterally re-write the terms of the mortgage by lowering rates and or dropping principal balance owed.

Some people may think this is great but consider this first: economists have said that, should this power be given, lenders will have to add about 3 to 4% to rates to offset future losses (long separate topic but rates have to, to some degress, reflect a factor of future losses. THINK ABOUT 10%  to 11% + rates (presently 6% or so, so add 3-4% and welcome back to the 1970's). You would not just get to relive the Carter era economics, you would witness and TOTAL CRASH OF HOUSING for years.


So, as to 'HOPE FOR HOMEOWNER'S' or if you get a giggle out of 'HOPE 4 HOMEOWNERS' (which also means you are in serious need of someone to make you laugh as this is a lousy joke) the bottom line is THERE ISN'T ANY HOPE FOR HOMEOWNERS - OR HOPE 4 YOU EITHER, in the supposed "HOUSING AND ECONOMIC RECOVERY ACT OF 2008.

Don't forget to send Congress a nice THANK YOU card for this. Sorry, the sarcasm is unavoidable.

Lets hope (and pray!) they can do something better than their present 'HOPE FOR HOMEOWNERS' attempt.

The recently signed law regarding assistance to homeowners has mostly been in the news as to those trying to refinance but are "upside down". While taht is great news there is also other exceptional news for home buyers. that is there is now aavialbe a tax credit of up to $7500 for people that buy this year.

 

HOW IT WORKS:

First let me say i am not an accountant so please seek the counsel of a tax professional.

Home buyers can receive up to $7500 is married and $3750 if unmarried, This is a CREDIT not a deduction form income. and if a person (or couple does not owe any money to the IRS they will STILL RECEIVE THE CREDIT!

The tax credit has a repayment to the IRS built in but they are basically calling it a 'tax free loan". contact me for details please.

 

THE REFINANCE PART OF THE LAW:

Many homeowners have been frustrated from financing because they owe more than the house is worth. this new program gets around that!

a person can refinance up to 90% OF PRESENT VALUE. The balance is wiped out (with the agreement of the present mortgage holder, something they seem willing to do)

The new loan would be a plain vanilla 30 year fixed rate loan through FHA!  Conditions are still being worked out by FHA and other government agencies but the fact is, it is the law of the land effective Oct 1, 2008.

Please contact me for details or to see if you qualify.

 

There are many aspects of the new bill that was signed into law recently that can be very confusing. i will elaborate in subsequent blogs but right now i invite any specific questions by e mail or phone.

this law CAN help people who are considering a short sale or just giving up their home. it also has a tax credit for those that buy this year.

more info to follow! but write or call if you think it can help you.

The Federal Reserve meets soon for its regular meeting but all expect no action such as drops in rates. The 3 points plus over recent time seems to be it for now. Mortgage rates fluctuating but on an upward trend.

FHA soon to implement "Risk Based Mortage Insurance". This shouldn't make FHA unattractive as an option to buy  but it will make it ever so slightly more costly if credit scores are in lower ranges. (alsways contact me about 'credit scores' if you have questions. RISK BASED MI will not be any big factor- in my opinion - as to NOT going with FHA. By far FHA allows the best options for great rates and terms (long term 30 year type loans) and no pre-payment penalties.

Also, credit tolerance is still better using FHA than conventional financing. MORE REASONS to go fha? Seller can pay up to 6% toward buyers closing costs & pre-paids (i.e.insurance, escrows), they can even pay the BUYERS DOWN PAYMENT! Using a down payment assistance  program a buyer can still buy with zero down!

Here in SW FLA the buys are still strong. I hear, and agree with, a solid 30 to 40% below value. Let's simplify that with this mental picture: if you were given a 1/4 acre lot for FREE and just called up a supply outlet and paid for the materials, and then if you said the magic words of "presto chango " and the materials miraculously assembled themselves, you would spend more than what you can buy  a house for now. The steals take a little patience as they involve dealing with banks that can't get out of their own way when trying to sell.

The horror stories of trying to close on a bank owned property or SHORT SALE are many, but the rewards incredible. 

Still never been a better time for buyers, whether baby boomers (who can buy and likely have the rent cover the house till retirement) to young fmailies - even singles in condos, the cost is so low as to make them affordable again. Unlike 3 years ago. 

More news as the time allows to updates but ready to share thoughts any time with any one out there! 
Vince 

I will use this opportunity to provide all interested parties with information they might find of value and interest.

In financial news: Fed Reserve Chariman Bernanke speaking via satellite to an international monetary conference in Spain indicated the Fed is unlikely to lower is benchmark Federal Funds Rate any further. He also added that, barring a rise in inflation, they probably won't rasie rates either; until there is more stabilization in home prices.


In the real estate market in Ft Myers and Cape Coral there is some exciting news, finally. Single family house sales continue on an upward trend. Sales in 2008: Jan 338, Feb 445, March 501 and April 809. Condo sales in Jan 122, Feb 181, March 234, April 351.  All signs indicate that buyers are realizing what good deals there are out there and making offers on them. There will probably be a year of incredible buys as more properties hit the market in what seems to be a tremendous buying opportunity. This is southwest Florida after all and properties are selling well below pre-boom proces in some cases.

As that sage analyst, Ben Stein said recently on TV: you make money by buying when others are panic selling. this is such a time. No matter where baby boomers finally settle SW Florida is going to get its share and right now they can pick up future retirement homes at amounts that are below cost replacement. I recently closed a house with access to the Gulf for $148,000. The stories of good deals are endless but remember: all of this is cyclical so don't delay if you are thinking of jumping in the water is fine.