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President Obama signed the new $787 B Stimulus Package on February 17, 2009.
While we did not see 4% interest rates, there were a few components of the American Recovery and Reinvestment Act that specifically affect our business:
Primary Residences Only,
First Time Homebuyer Only,
Same Income Limit ($75K single, $150,000 couple)
Tax Credit Not a Tax Deduction
Homes purchased between January 1, 2009 and December 1, 2009
Up to $729,750 in any area.
King County it was $567,500.
Details to be announced on March 4.
Energy Savings and Green Jobs to promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy efficient windows, or insulation, etc.
Landmark Energy Savings--this provision provides $5 B for energy efficient improvements for more than one million low income homes through weatherization. It is estimated to save families $350 a year on heating and air conditioning bills.
Repair Public Housing and Making Key Energy Efficiency Retrofits to HUD-Assisted Housing--provides $6.3 B for increasing energy efficiency in federally supported housing programs.
Expanding Housing Assistance--this provision increases support for several critical housing programs. It includes $2 B for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
President Obama also announced a $275 B Foreclosure Relief Plan to help stabilize the Housing Market. The full details of the Homeowner Affordability and Stability Plan will not be announced until March 4, but here are the highlights as of now:
1) Refinancing for Up to 4 to 5 Million responsible Homeowners to make their payments more affordable.
This refinancing initiative is aimed at helping homeowners with less than 20% equity in their homes or who owe more than their home is worth. This is aimed at homeowners with conforming loans who owe up to 5% more than their home is worth.
As part of this plan, �credit-worthy� or �responsible� homeowners can refinance their mortgage into a 30 or 15 year fixed rate loan based on current market rates.
2) A $75 Billion Homeowner Stability Initiative to reach Up to 3 to 4 Million At-Risk Homeowners
The goal is to stabilize the housing market by keeping families struggling to afford their mortgage payments but cannot sell their homes due to falling home prices.
The plan aims to �reduce the amount homeowners owe per month to sustainable levels.� Lenders are encouraged to lower homeowner�s payments to 31% of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also reduce the principal owed by the borrower with the Treasury sharing in the costs.
Again this is an incentive plan for primary residences only, not investment properties. Here are some of the additional elements:
To encourage lenders to reach borrowers in trouble before they default on their mortgage, an incentive payment of $500 will be paid to loan servicers, and an incentive payment of $1,500 will be paid to mortgage holders if they modify at-risk loans before the borrower defaults on their mortgage.
�Pay for Success.� In addition, Loan Servicers will receive an up-front fee of $1,000 for each successful modification and will receive a monthly pay for success fee for borrowers who stay current up to $1,000 per year for 3 years.
As long as a borrower stays current on his/her loan, homeowners will qualify for a monthly principle reduction up to $1,000 per year for 5 years.
Home Price Decline Reserve Payments. The Administration along with the FDIC has allocated up to $10 B for an innovative partial guarantee initiative. This insurance plan is designed to discourage lenders from foreclosing on mortgages now in fear that the home will be worth less money in the future. Holders of mortgages modified under this program will be provided with an additional insurance payment in each modified loan.
The Foreclosure Plan calls for Clear and Consistent Guidelines for Loan Modifications.
Develop uniform guidelines for the industry and establish strong oversight, reporting, and Quarterly meetings with the Treasury, the FDIC, the Federal Reserve, and the HUD to Monitor Performance.
3) Support Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac
Using funds already authorized in 2008 by Congress, the Treasury Department will increase its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain affordability.
Treasury is increasing its Preferred Stock Purchase Agreements to $200 B each from their current level of $100 B each. The Treasury will continue to purchase mortgage backed securities issued by Fannie Mae and Freddie Mac to promote liquidity and stability.
The Treasury is increasing the size of the GSE�s retained mortgage portfolios allowed under the agreements from $50 B to $900 B along with corresponding increases in the allowable debt.
The $200 B will not come out of TARP money but rather will come from funds allocated under the Housing and Economic Recovery Act passed on July 30, 2008 by the Bush administration.
The details of this plan will also be unveiled on March 4; however, for now you can download a sheet of common Questions and Answers produced by the government at:
www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ConsumerQA.pfd
As details of the plan are released, I will do my best to keep you updated.
Please call or e-mail me with any questions.
Lysa M. Catlin Windermere Mortgage Services Series LLC/East
Branch Manager/Mortgage Consultant
(425) 451-3815 office
(425) 451-3871 fax
(206) 963-0191 direct
www.windermeremortgageservices.com/lcatlin
