Orlando Real Estate News

Housing Stimulus Bill signed into law today - H.R. 3221, the “Housing and Economic Recovery Act of 2008,” passed the House on July 23, 2008, by a vote of 272-152. On Saturday, July 26, 2008, the Senate passed the bill by a vote of 72-13. The President signed the bill on July 30, 2008. The bill includes the following provisions:

• GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
• FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The downpayment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
• Homebuyer Tax Credit - a $7500 tax credit that would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).
• FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
• Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.
• VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.
• Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.
• GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.
• Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.
• National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.
• CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.
• LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.
• Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.

 With a little more than two weeks left before Congress leaves for the August recess, NAR is working hard to get a Housing Stimulus bill on the President’s desk.

         In the latest edition of the NAR’s President’s Podcast, NAR’s Chief Lobbyist Jerry Giovaniello explains what is included in this complicated legislation and why it is so important to REALTORS® and the housing market.

A temporary tax credit would be the best incentive to move hesitant home buyers into the market, the NATIONAL ASSOCIATION OF REALTORS® told Congress on Thursday.

NAR said the tactic has been successful before; A 1975 temporary tax credit helped to “clear an over-supply of newly constructed homes during an economic downturn.”

“We urge Congress to move quickly to conference and final passage of this tax incentive,” said Jim Helsel, NAR treasurer and a partner in RSR, REALTORS®, in Lemoyne, Penn. “Failure to act quickly could further stall the housing market, hurting many of our members, who are predominantly small businesses owners and self-employed individuals.”

Testifying for NAR before the House Committee on Small Business, Helsel said there are “three critical features for an optimal home buyer tax credit.”
The credit should apply to all residential real estate — not solely foreclosed properties.
It should be temporary and only apply for a short period of time.
It should provide higher income limits than those the House has imposed, particularly for single individuals.

“If these measures are put in place, many individuals who are sitting on the fence will take steps to buy a home. This would not only help homeowners, buyers and sellers, but also it could expand activity as individuals furnish, paint and improve their homes. This would help boost the nation’s economy,” Helsel said.

NAR also discussed the importance of updating the “passive loss” rules that were enacted in 1986 to bring small investors back to real estate. The passive loss rules were not indexed for inflation, making the tax incentive irrelevant in most cases, Helsel said.

Source: NAR

The two largest sources of U.S. mortgage financing agreed on Monday to sponsor a new home appraisal watchdog to prevent inflated home values.

Fannie Mae and Freddie Mac will uphold a new code of conduct meant to keep mortgage lenders at arm’s length from home appraisers and will also spend $24 million to jump-start the new oversight body in a deal to prevent lawsuits from New York Attorney General Andrew Cuomo.

Starting January 1, 2009, the government-sponsored enterprises will buy home loans only from lenders that endorse an appraiser code of conduct that Cuomo said he hopes will become an industry standard.

“This is one of the greatest, most dramatic reforms of the housing industry in the last 20 years,” Cuomo said at a press event in New York announcing the deal. “We believe as a group that this will be a significant and dramatically positive reform.”

Since Wall Street gladly bought and bundled home loans for investors during the housing boom, lenders may have felt more comfortable inflating loan amounts. Cuomo filed subpoenas against Fannie Mae and Freddie Mac to determine whether the companies stood by as that happened.

The new code will prohibit mortgage brokers from selecting a home appraiser, while lenders may not use in-house assessors for initial reports on the value of homes. In another provision of the settlement, Fannie Mae and Freddie Mac will each provide $12 million over the five years to help establish an appraisal oversight body.

The companies’ federal regulator, the Office of Federal Housing Enterprise Oversight, will host the new watchdog group, which will maintain a consumer hotline and promote appraiser independence.

The new standards will help break long-standing business practices under which lenders often had close ties to home appraisers.

What you should do to receive benefits of Amendment 1 (Property Tax Reform)
 
To receive some of the benefits of the changes enacted January 29th, certain citizens must take action by March 1, 2008.
 
The Constitutional amendment created four new opportunities for taxpayers to obtain tax relief:
 
1.    Increased homestead exemption
2.    Portability of “Save our Homes” benefit
3.    $25,000 exemption for tangible personal property
4.    10% annual assessment limitation for non-homestead property
 
What taxpayers must do to receive these new benefits:
 
1.       Increased homestead exemption - Homeowners that are currently receiving the homestead exemption will automatically receive the increased homestead exemption. No action is necessary.
 
2.       Portability of “Save our Homes” benefits - If you received the homestead exemption in 2007 on a home that you sold or otherwise abandoned during 2007 and have purchased a new home by January 1, 2008, you are eligible to take some or all of the benefit of “Save our Homes” to your new home. In order to receive this benefit, you must apply by March 1, 2008 to your property appraiser for your new homestead exemption and for the transfer of the “Save Our Homes” benefit to your new homestead for 2008. Form DR501t is attached.

3.       $25,000 exemption for tangible personal property - Tangible personal property taxes apply only to certain taxpayers in Florida - typically businesses and certain owners of mobile homes. The tax does not apply to homesteaded property. In order to receive the $25,000 exemption for tangible personal property, taxpayers subject to the tax must file a tangible personal property return with their property appraiser by April 1, 2008.
 
4.       10% limit on annual assessment increases for non-homestead property - The 10% limitation does not apply until next year. No application is necessary for 2008.
If you have any questions about what action you must take to receive these new benefits, please contact your local property appraiser. For information on how to contact Florida’s property appraisers, go to http://dor.myflorida.com/dor/property/appraisers.html.

Six top mortgage lenders and servicers Tuesday launched a new program aimed at staving off foreclosure for seriously delinquent borrowers in the hopes that new, more affordable loan terms can be worked out.

 ”Project Lifeline,” backed by the U.S. Treasury and Department of Housing and Urban Development, would pause foreclosure proceedings for borrowers more than 90 days in arrears while services determine whether they could make payments under new terms, the lenders said in a statement.

The effort would cover all types of home loans, unlike an earlier plan aimed at freezing interest rates for subprime mortgage holders who cannot afford rates that reset to higher levels.

On a pilot basis, the plan will involve six of the largest mortgage lenders, in hopes that more lenders will sign on. The participants are Bank of America, Wells Fargo, Washington Mutual, JPMorgan Chase, Citigroup and Countrywide Financial.

All six are involved in Hope Now, an effort the Bush administration brokered with the mortgage industry late last year to freeze rates on some high-cost subprime mortgages for five years to aid borrowers whose teaser rates are jumping sharply higher. Since then, Treasury Secretary Henry Paulson has urged lenders to expand that effort to cover struggling homeowners with conventional mortgages.

The new plan applies to seriously delinquent homeowners, those whose mortgages are 90 days or more past due.

With home prices falling, even some people with good credit have gotten behind on their payments. Like many subprime borrowers, they signed up for adjustable-rate mortgages that allowed them to make smaller, steady payments for several years until a higher fluctuating interest rate kicked in.

Some borrowed against their rising equity as home prices climbed, assuming they would be able to refinance or sell their homes before the higher payments began. But as prices have plummeted, many homeowners now owe more than their home is worth, and banks have tightened their lending practices, leaving even people with stellar credit struggling with higher payments.

The Hope Now alliance, which includes lenders, investors and nonprofit groups, said last week that it helped nearly 8 percent of subprime borrowers in the second half of 2007–more than its original estimate.

The group said it helped 545,000 subprime borrowers with spotty credit in the second half of last year, compared with its January estimate of 370,000. That works out to 7.7 percent of 7.1 million subprime loans outstanding as of September.

Among the subprime borrowers aided, 150,000 were helped through permanent-loan modifications, such as lower interest rates, while 395,000 negotiated repayment plans, which often involve a borrower getting back on track even after missing a few payments.

Consumer groups, however, point out that many borrowers still can’t keep up, even after loan workouts. They say many of the borrowers in the Hope Now effort have negotiated short-term loan modifications or repayment plans, which often involve a borrower getting back on track after missing a few payments. A full-fledged refinancing at a lower rate is preferable, they say. 

Early this summer, lawmakers passed landmark legislation to create the largest tax cut in Florida’s history. What passed was a two part process that put the people in control:

Step one was a law that required local governments to roll-back taxes this year, and then to grow at a responsible rate in the future.
Step two is in the hands of the People of Florida.
On January 29, the people will have the power to cut their taxes in a historic way by passing the constitutional amendment.
Floridians have the power and choice to lower their tax bill. They can decide what is best for their pocketbook on January 29, 2008.
 
Floridians need property tax relief
With the passage of Amendment 1, citizens will gain the freedom to purchase a new home without huge tax penalties, and rental home owners, second home owners and businesses will benefit by limited future tax increases.

The amendment contains two provisions that Governor Crist has long advocated: doubling the homestead exemption and portability of the Save Our Homes tax benefit.

Double the homestead exemption for almost all homeowners, providing an average savings of about $240 annually. The new exemption applies fully to homesteads valued over $75,000 and partially for homesteads valued over $50,000. This new exemption does not apply to school taxes.
Allow portability: The Governor has heard from many constituents that they feel trapped in their homes. Portability will allow homeowners to transfer their Save Our Homes tax benefits from their old home to a newly purchased home. Portability applies to homes purchased in 2007 and later, and the benefit is capped at $500,000.

If you upsize, you will be able to apply the dollar value of your Save Our Homes tax benefit to your new home.

For example:

Homesteader owns home valued at $300,000 and buys a new home valued at $400,000
If you downsize, you will be able to apply the percentage of the Save Our Homes benefit to your new home.

For example:

Homesteader owns home valued at $300,000 and buys a new home valued at $150,000
Provide an assessment cap of 10% for all properties, not previously capped: While homestead properties are already capped at 3%, now all other properties, including rental properties, second homes, and business properties, will be protected from huge increases in valuation. This new exemption does not apply to school taxes.
Create a new $25,000 exemption for business property, including office furniture, computers, machinery and equipment.

Estimates provided by the Legislature show that Florida homeowners and businesses will save over $12 billion in property taxes over the next five years.

Today Freddie Mac released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage averaged 6.07 percent with an average 0.5 point for the week ending January 3, 2008. This is down from last week when it averaged 6.17 percent. Last year at this time, the 30-year FRM averaged 6.18 percent.

New home sales dropped across the nation last month to a twelve year low, a negative sign of consumers’ reluctance to buy and tougher lending despite lower interest rates.

The Commerce Department on Friday reported a 9 percent drop in the sale of new homes in November.

Orlando chose to miss its own December 12th deadline for issuing bonds for the $480 million dollar new Orlando arena project. The delays is said to pay off in the end.

Due to the uncertainty in financial markets which could have increased the interest rate the city would ultimately have to pay investors had the City of Orlando kept to its original plan to issue the $335 million in bonds.