Richard's Real Estate Thoughts: Housing Bill is law - President signs massive housing bill in a quiet ceremony

Richard,

It is shocking they did not play this up.  I mean if it is going to do all you have written, it should be a wonderful boost to our industry.

Ann

I can not find a published version of this bill in its final form - do you know where to look?

It seems that information is coming out in bits and pieces.  As you said, good sound bites, but it doesn't seem to do anything... or have I missed something?  As I understand it, the bill includes provisions to

Remove seller funded down payment assistance options - this was based on FHA's stats from 2004, not based on recent stats, and I could make many arguments that anything failing in 2004 would not result in a loss, since the market had been escalating at that point, and properties could be sold for more than a prior purchase price.  So, was there $ even lost when these people defaulted... I bet the stats would say NO, which is why no one acted on it for years.... and NOW (IMHO) is not the time to take away any tools in the tool box that might help more people enter the market.  By nature (at least in my neck of the woods) FHA loans, and certainly those with seller funded DPA do not happen in sellers' markets, only buyer's markets - when we need them, we need everything we can get to stabilize this market.

Provide a tax break - it's unclear to me if it is for first time home buyers, people buying REOs/foreclosures, or first time home buyers buying REOs/foreclosures.  In any case, the terrible part is it has to be PAID BACK?  Most homeowners own for 5-7 years, in some markets $7500 might be the entire gain that one earns in appreciation in "normal" years, let alone that we are expecting flat markets for the next good while.  So, in my opinion, this is just stupid (let me tell you how I really feel, right?).  I wouldn't even USE it, it is just another debt to take on.  Isn't debt the problem here?  All this is, is an interest free loan, but worse, because I think you get it in increments and have to pay it back all at once.  What kind of crock is this?

Stop foreclosure - their big idea is that if the bank will agree to lower the amount of the loan to 90% of the current market value of the property today that they'll permit an FHA refi.  So many problems with this.... Consumers who are defaulting often had some kind of (a) mortgage insurance (private or government); or (b) have 2 lenders.  So, why is the bank going to agree to this?  Where's their gain?  Better for them to foreclose and collect the mortgage insurance.  Or, in the case of 2 lenders, the second lender will get nothing, so why would they permit this?  They won't.  Plus, most banks have this "you must have had a hardship" mentality before they will work on any loan modification, short sale, etc. (this will fall into that group).  Apparently, the fact that you got into a house you couldn't afford in the beginning is not a hardship... the fact that you HAD $30K in savings then and now you have no savings and are $20K in debt on your credit cards just to live is not a hardship... so, banks aren't talking to these people.  Plus, banks are not talking to anyone who owns an investment property - hardship or not - to work out anything.  So, I think this provision will help a total of 12 people nationwide - MAYBE. 

Talking about my feelings on this gets me hot under the collar.  There is so much stupidity going on in this market - did we really put people who are this dense in our government?  Do not misunderstand me, I am not about debt forgiveness... I've paid back every dollar I've ever owed, and as a result learned how to be careful when committing to taking on debt.  But, being REASONABLE, cutting their losses... that is what banks should be doing.  What the government needs to do is make the banks take their medicine. 

Congratulations to all three houses of our executive branch - you've waste a lot of hot air and been paid a lot of money to come up with a bill that is useless.

You know, I really don't want to be in politics... but I might have to introduce a bill here, something that will make a difference.  I need to go watch PBS now and hope that song - you know, the one that explains how law is made - comes on.  This time, I will take notes.

And as of Oct. 1st Nehemiah and AmeriDream go bye-bye!  I have never been that much of a fan of either of these programs but I have had plenty of buyers use them over the years and I hate to see them go away!

This bill was signed in secret almost because it is a politicians bill, and a banker's bill.  It is loaded with pork barrel opportunities for all and includes Fannie Mae and Freddie Mac - it raises the deficit and our budget, and places the bill on the US Taxpayer.

I am curious about the low key angle, and the meaning of that.  Since it is supposed to 'help' so many, why not lots of publicity?!?!?  Hmmm, curious!

Richard, I am not convinced this bill will accomplish much in the way of help to consumers. I think it is more hubris and saber rattling to make Capital Hill look better in the eyes of their constituents.

1.) Hope Now was created by servicers and lenders (it is a LONG list) to voluntarily assist troubled homeowners from losing their homes. This is something that does not need to be legislated.

2.) the tax benefits of buying a home for first time homebuyers is hollow. Simply because I am not how a buyer takes advantage of it. Does it go on the HUD as a credit? It is soft money that has not real value to a transaction. And since the average sales price in most markets is well over the 150,000 range, the 7.500 cap does not do much.

3. Eliminating DPA's and raising the down payment requirements for FHA, FNMA and FHLMC makes it even more difficult to buy a home, first time buyers or not.

I believe it requires much more research, but at first glance
 I am not convinced.

Bo

Ann,

I think it is not a wonderful boost to our industry. Jim Crawford wrote that it is a politician's bill and a bankers' bill. I think it is just a politician's bill, and I think it will work to drive further down our market.

It seems very expensive for what is accomplished.

Spending our money just to be able to say we did something, and perhaps under pressure from foreign investors.

Thanks,

Richard

Vickie,

You have just about expressed my thoughts exactly. This government makes me sick to my stomach. This new law, signed in a closet, just adds to my illness.

The tax credit/loan is for people who meet the income restrictions and have not owned a primary residence in the last 3 years.

I took calls today about the FHA refinance program. I do not know the details - who can do the loan, how do you negotiate the settlement. No one has any details. These loans will be impossible to process and close.

It is a big distraction from dealing with market realities, and a way for politicians to say they did something, nevermind that it is something not workable.

In this case haste has made a very big waste.

The links I have for the actual bill (not the final law unless the bill is unchanged). You may have already seen these.

 http://www.opencongress.org/bill/110-h3221/show

http://www.opencongress.org/bill/110-h5720/text

Although I like the NAR summary given on Robin Willis' blog

http://activerain.com/blogsview/616907/Housing-Stimulus-Bill-Signed

http://www.realtor.org/gapublic.nsf/pages/hr_3221_key_provisions?OpenDocument

Thanks,

Richard

Steve,

I liked the seller funder assistance programs. My guess is that they did some kind of charity work - they had to withstand some IRS pressure to keep their status.

I do have some horror stories from some programs. One sent a check that bounced. That company folded, leaving some poor receptionist to handle the calls. The principles disappeared in the hills of Kentucky.

Another company wanted to fax a copy of a check and have the title compay just send their fee. Now that is funny. The loan officer argued with me that that should be OK - it was no different that funding and being immediately reimbursed.

I think the program helped a lot of buyers for a long period of time. The home sales that these buyers accounted for  will not be replaced.

So, we have lost 30% of our FHA sales.

We better get started replacing them with new buyers from somewhere. I am sure that the House Finance Committee and the rest of Congress has a plan.

Richard

Ronald,

It is not transparent bill - it is loaded and in my opinion passed without adequate comment at a time when industry voices were especially weakened.

They had to do something, and they sure did.

Richard

Jim,

So, what do you think of the new Housing law?

Richard

Bo,

Thanks for passing the link to Hope Now.

The last two major mortgage bills were both dealing with issues that the market had already addressed. The predatory lending bill made illegal loans that do not exist anymore. Lenders are already negotiating short sales, new payment arrangements, and new loans when circumstances warrant.

TN and other states are already instituting originator licensing and education requirements.

I wish the federal government would pass bills separately, so each could stand on its own merit. I wrote a post about that some time ago. I toned it down from my actual feelings, but I wish I had written what I had been encouraged to write at the time.

"The thinking is that if the legisislation were more transparent, then our elected leaders could not work out that kind of behind doors deal. And frankly they should not be able to do so."

Thanks,

Richard

Richard.. this sounds good... Only time will tell.. Thank you for sharing.

Richard,

Sorry the "sarcasm" did not come through in my comments. :-)

Ann

I have to say that if the "hid" to sign this bill then there has to be something underhanded in it.

Richard:  I honestly have mixed emotions about the loss of seller-funded DPA programs as well, but I do know that in the last few years my office has been able to put plenty of people into homes that would have had a much more difficult time without these programs to help.  And in all cases, I can't remember any of those getting into trouble later.  These were nurses, school teachers, police, fire fighters, and other good, hard-working people that just needed help to get an FHA loan.  I realize that the numbers nationally did not make the program look favorable, but I feel that we have lost a program here that was doing what it was designed to do - helping people who need help to recognize the American Dream!  <stepping down from my soapbox now>

Steve,

Appreciate your comments, and love your new blog design.

I had some FHA defaults, and some with DPA's. We have used DPA since the 90's. We have LO's here who think FHA means DPA, that it is the FHA 100% program.

Every FHA DPA default that I know of was a weak file in all areas of the loan - no down payment, weak and limited trade lines, no housing history and large housing increase, some with weak employment histories.

The underwriter probably should have denied the loans based on layering of risk, and probably some of the defaults were denied by the first lender or even the first couple of lenders.

We submitted loans to different lenders until we found an approval or until I said stop. Nothing exactly wrong with the files, they all met the minimum qualifications. But the files were too weak.

Our goal was if a loan might possibly get approved by someone (legitimately - no misrepresentation), then we tried to get it approved.

DPA probably should not have been allowed on files without established good credit, including 12 or 24 months satisfactory housing.

I am as guilty as anyone in using DPA to get weak borrowers into an FHA loan.

Richard

Ann,

I probably should have picked better up on the intent behind the original comment.

Thanks,

Richard

Roland,

The bill is law, and now we will see what transpires. I know that the lenders are waiting for some guidance from HUD and the other agencies.

There will be no developments until guidelines are promulgated.

Richard

Danny,

I just think the bill was rushed. Too much in it to be passed underpressure.

Richard

I think it is more of a front, and really didn't do much but give money to Fred/Fannie Mac's and they are afraid if too many saw details, they would be criticized.  I still think that couple weeks later.  I am still curious, since they are still touting how many 'millions' are going o be helped why they didn't want to publicize it more.

Ronald,

I do not think they are saying millions will be helped. The numbers I have seen are 400,000 to 500,000.

The more I look at the bill the worse it gets. I had another post going into more detail about the Foreclosure relief. I actually think that the maximum closing cost is set at 2%, and that limit is written into the law, at least the version I read.

We probably need to hold judgement until the mortgagee letter is published, but it does not sound promising to me.

Richard