Housing and Economic Recovery Act of 2008 (CRS Report for Congress)
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| Release Date |
Revised Dec. 5, 2008 |
| Report Number |
RL34623 |
| Report Type |
Report |
| Authors |
N. Eric Weiss, Eugene Boyd, Darryl E. Getter, Oscar R. Gonzales, Mark Jickling, Mark P. Keightley, Edward V. Murphy, Bruce E. Foote |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The Housing and Economic Recovery Act of 2008, P.L. 110-289, is likely to affect most owner-occupied housing in the United States through a variety of channels.
The act creates a new, stronger, unified regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (the housing GSEs). As a result of various provisions in the act, the secondary mortgage market is likely to be broadly affected. For example, the Secretary of the Treasury is given (until December 31, 2009) the authority to lend or invest in the housing GSEs on whatever terms the Secretary determines to be appropriate. Starting in 2009, the maximum high cost conforming loan limit is increased to 150% of the conforming loan limit; this will be $625,500 in 2009. For the first time, Fannie Mae and Freddie Mac can and have gone into conservatorship. The GSEs were placed under conservatorship on September 7, 2008, and Treasury used its new power to enter into a series of agreements to provide them with financial support.
The act also modernizes many aspects of the Federal Housing Administration (FHA). In high-cost areas, the maximum loan that the FHA can insure is identical to the maximum mortgage amount that the housing GSEs can purchase. The minimum downpayment on FHA-insured mortgages is increased from 3% to 3.5%, seller-assisted downpayment assistance is prohibited, and there is a moratorium until October 31, 2009, on the FHA's implementation of risk-based insurance premiums.
HOPE for Homeowners authorizes the FHA to insure up to $300 billion in mortgages that refinance homeowners who are unable to pay their current high interest rate mortgages. As a condition of the borrower being eligible for the program, the current lender must agree to write-down the principal of the existing mortgage to achieve a 90% loan-to-value ratio.
Other provisions lengthen from 90 days to 9 months the stay of foreclosure on service members' homes and provide additional support for disabled veterans with special needs. The act appropriates $4 billion for state and local governments to purchase and rehabilitate abandoned and foreclosed housing. This housing would be sold or rented to low- and moderate-income individuals and families.
Tax provisions in the act include a refundable tax credit based on 10% of the price of a home purchased by a first time homebuyer. The maximum tax credit is $7,500 and the homebuyer pays back the credit over 15 years. This is roughly equivalent to a price reduction to one-third of the amount of the credit ($2,500). Homeowners who do not itemize on their tax returns can deduct state and local property taxes up to $500 ($1,000 on joint returns).
This report will be updated.
