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Who benefits from the new mortgage bill?

Let's look at the various groups affected.

Those in danger of foreclosure. Cash-strapped homeowners who purchased prior to January 1, 2008 will be able to refinance through the FHA into a more affordable, fixed rate mortgage. The previous mortgage holder is encouraged to forgive the debt above 90 percent of the home's current appraised value, thereby lowering the overall loan amount of the new loan. FHA insured mortgages will only be available to those homeowners who can demonstrate the ability to repay the new loan and who can show verifiable income. There is also a clause that requires homeowners who take advantage of the program to share in the appreciation of the home in a sliding scale that doesn't go below 50 percent.
It is somewhat complicated, but, remember it was created by the same group that gave us our current tax code. And, while there are no guarantees that an individual homeowner will benefit, those currently behind on their mortgage should immediately contact their mortgage holder to see if they qualify.

First-time homebuyers. The law extends a tax credit to first-time homebuyers (those who haven't owned a home during the past three years). The actual credit is for 10 percent of the purchase price of a home, up to a $7,500 maximum, and it phases out as income-increases. Eligible homebuyers must have purchased between April 8, 2008 and July 1, 2009. This tax credit is actually an interest free loan that must be repaid over a fifteen year period through an increase in the annual income tax due.

Those who pay property taxes but don't itemize. Those who can't currently deduct property taxes on their primary residence (frequently retirees who are mortgage free) can deduct up to $1,000 (or $500 for single filers), but no more than the actual property tax paid, from their 2008 federal income taxes.

Homebuyers who receive down payment assistance. The bill eliminates down payment assistance programs, effective October 1, 2008. This is designed to close the loophole that had allowed sellers to pay the down payment through certain non-profit organizations.

Seniors seeking reverse mortgages. The bill tightens the restrictions for reverse mortgages in an effort to eliminate unscrupulous lenders. It also places a limit on the origination fees that can be charged on these loans.

Manufactured housing buyers. The old limit of $48,000 for the purchaser of a manufactured home has been raised to $70,000 and will be indexed to inflation in future years.

Homebuyers needing financial counseling. The bill establishes an Office of Housing Counseling, will require licensing and registration of mortgage brokers, and will publish mortgage and financial help booklets to be given to those applying for mortgages.

Veterans. Members of the armed forces returning from active duty will be eligible for certain benefits and protections regarding mortgage interest and the initiation of foreclosure proceedings.

Those living in areas blighted by multiple foreclosures. The bill provides $3.9 billion in grants for governments to buy and fix-up properties in areas overrun with foreclosures. There is also a provision for the construction of affordable rental housing.

Buyers in cities where housing is more expensive. The limits for mortgages that can be purchased by Fannie Mae and Freddie Mac and underwritten by the FHA, is raised to $625,000, providing assistance in those locations with higher home prices.

The investors, management, and politicians supporting Fannie Mae and Freddie Mac. The bill grants the Treasury Department the power to extend an unlimited line of credit and purchase stock in Fannie Mae and Freddie Mac, so-called private companies that are chartered by Congress, and now, it seems, backed by the Treasury. The short-term benefits are that confidence will be bolstered in these two operations and politicians can show voters that they did something toward the housing crisis, but the long-term outlook may not be as positive. The two mortgage giants still retain their ability to lobby and sway congressional actions (In the past, both operations have paid millions in fines for improper political activities and contributions). They will continue their imaginative accounting practices with political immunity, with more short-sightedness than oversight from Congress.


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