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The California Association of Realtors notes the following housing benefits in the recently passed stimulus bill:

"On the housing front, the good news is that the legislation resets the conforming loan limit cap at $729,750, up from $625,500. Numerous counties in California experienced a marked decrease in their conforming loan and FHA limits on Jan. 1, and the stimulus bill reinstates 2008 loan limits through Dec. 31, 2009.

The bill also increases the first-time home buyer credit from $7,500 to $8,000, and removes the requirement that the credit be paid back if the buyer stays in the home for at least three years. It also extends the expiration date for the credit from July 1 to Dec. 1, 2009.  Homebuyers must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009, to be eligible for the $8,000 credit."

I think there are likely to be income limits (meaning the credit is going to either be reduced or eliminated based on your income level).  Details are not yet available but are expected soon.

If you want additional information or if you have any questions, please do not hesitate to call me or email me.  (714) 863-5485 johnsonlaw@sbcglobal.net

-m

President Obama unveiled rough details of his proposed plan to help straighten out the housing sector.  Right now/pre-Obama options when you are upside down on your home loan or can't make payments:

1. foreclosure (walk away)

2. short sale (cooperate with the bank to accept a sale for less than you owe and forgive the rest)

3.  deed in lieu (give it back to the bank--deed it back to the bank instead of making the bank go thru the foreclosure process)

4.  loan modification (reduce interest rate, temporarily reduce or forbear payments or principal reduction)

5.  bankruptcy ch 7 - a full liquidation bankruptcy and bank will eventually get permission to proceed with sale/foreclosure of your home.  No need to be employed for this one.

6.  bankruptcy ch 11 - you might get to keep the house but loan remains--stops foreclosure until there is a bank approved plan.  You need to be employed for this one.

Proposed Post-Obama additional options.  These are fuzzy at best and the final results make look much or even entirely different but here is what is proposed so far:

7.  105% Refi -- if you are barely underwater you can refi your loan up to 105% of the home's value to help you get out of a bad loan or oppressive interest rate.  No need for the 20% down if you can get into this proposed program. 

8.  Subsidized mortgage - federal tax dollars will be used to help reduce your loan payment to as little as 31% of your gross income for your principle residence.  From what I gather, this is expected to be a 4 to 5 year interest rate (not principal) reduction.  Look for some serious limitations on who may qualify and funds committed to this are limited. Currently proposed to be limited to "conforming loans" that are owned or guaranteed by Freddie or Fannie--so those of you jumbo purchasers out there (and CA has so many of them) and Alt-A (less than prime borrowers) are likely not eligible.  I personally expect this one to have serval steep limitations (like income)...but Mr. Obama has not asked me to be on the committee. :) 

9.  Bankrutcy cram down - currently a bankruptcy judge can not force your lender to adjust or reduce the loan on your home (a forced adjustment to your loan terms would be called a "cram down").  Mr. President proposes allowing judges to do so if the lender won't agree to a loan modification. 

My personal commentary on this one...it seriously concerns me because Wall Street and the banks are going to  be much less willing to loan when a BK judge can modify the loan.  Imagine if you loaned money to Mr. Smith, secured by his home.  Pre-Obama, if he failed to pay you, you could foreclose on his home.  It was your security.  Now you may have to factor in the risk that instead a BK judge could come along and say, Well, Mr. Smith owes you $300,000 but now that values have dropped, you need to change your loan terms or else risk that loan could be reduced (now Mr. Smith only owes you $200K) or the interest rate could be dropped (now Mr. Smith only has to pay you back at 4% instead of the 6% you agreed upon) or the term could be extended (now Mr. Smith has 20 years to pay you back instead of 10) or some combination thereof.   I think the cram down proposal runs the risk of creating an even tighter lending market. Banks and Wall Street will charge for this risk--so everyone will pay higher interst rates. Thumbs down from me on this one--but again, my Obama mortgage committee invitation has not arrived.  Maybe tomorrow.

More posts as things are hammered out...details expected March 4.  If I got something wrong, my apologies...just consider this a sneak peak at what might be....

If you have any questions or comments, feel free to call  or email me.  

Melinda (714) 863-5485 johnsonlaw@sbcglobal.net