H.R. 3221 would:
► Give the Federal Deposit Insurance Corporation the authority to create so-called bridge institutions for failing savings associations, mirroring a capability that has existed since 1991 for failed banks.
► Give the Federal Housing Administration $300 billion in new lending authority and relax standards to provide affordable, fixed-rate mortgages to an estimated 400,000 debt-ridden homeowners. Any losses would be covered by an affordable housing fund financed by Fannie Mae and Freddie Mac, the government-sponsored companies that finance mortgages.
► Allow the Treasury Department temporary authority to lend money to Fannie and Freddie or buy their stock to avert a collapse of one or both of the mortgage giants. The authority would expire on Dec. 31, 2009.
► Create a new regulator and tighten controls on Fannie and Freddie, including power for the regulator to approve pay packages for company executives. Create a new affordable housing fund drawn from their profits. Permanently raise the limit on the loans they may buy to $625,000 in the highest-cost areas. Allow them to buy loans 15 percent higher than the median home price in certain cities.
► Provide $3.9 billion in grants to the hardest-hit communities for buying and fixing up foreclosed property.
► Modernize the FHA and allow it to back loans for riskier borrowers. Permanently increase the size of loans the agency may insure - currently set to revert to $362,790 by the end of the year - to $625,000 in the highest-cost areas. The agency could insure loans 15 percent higher than the median home price in certain cities.
► Forbid the FHA from insuring mortgages in which the borrower's down payment is paid by the seller, beginning on Oct. 1, 2008. Place a one-year moratorium forbidding the agency from charging premiums based on the riskiness of the homeowner, until Oct. 1, 2009.
► Provide $15 billion in housing tax breaks, including for low-income housing. Give a credit of up to $7,500 for first-time home buyers who purchase residences between April 9, 2008, and July 1, 2009. Allow people who don't itemize their taxes to claim a $500-$1,000 deduction on their 2008 property taxes. (NOTE: The credit is 10 percent of the purchase price or $7,500, whichever is less -- but for married people filing separately, the $7,500 limit becomes $3,500. Unmarried people who jointly purchase a home can divide the $7,500 credit, but how the division is to take place is left to IRS regulation-writers. The credit begins to phase out at the $150,000 income level for joint filers ($75,000 for other filers) and is not available for joint filers with income above $170,000 ($95,000 for other filers). It's also not available to nonresident aliens, those who qualify for a similar District of Columbia credit or those whose financing comes from tax-exempt mortgage revenue bonds. The credit is more of an interest-free loan than a complete giveaway; taxpayers will have to pay back the credit they claim over 15 years.)
► Give states an additional $11 billion in tax-free municipal bond authority for low-interest loans to first-time home buyers, construction of low-income rental housing and refinancing subprime mortgages.
► Offer protection from investor lawsuits for mortgage holders that modify loans to borrowers who are in default or about to default.
► Provide $180 million for pre-foreclosure counseling and legal services for distressed
borrowers.
► Provide Chrysler a corporate tax incentive even though the company is now structured as a partnership not a corporation. The bill does not name Chrysler but rather describes an unnamed automobile manufacturer “that will produce in excess of 675,000 automobiles” between Jan. 1 and June 30, 2008.
Some people may be adversely affected by the bill, including those who buy a vacation home, or who rent out a home while planning to make it their main residence at a later time. Currently, if a second home becomes a principal residence, after two years the owner can sell it and exclude up to $250,000 in gain from their income -- or up to $500,000 for couples filing jointly.
But the bill pro-rates the exclusion between the time that a home is used as a principal residence and the total length of ownership, which includes any "non-qualifying" use as a rental or vacation property. Non-qualifying use before the January 1, 2009, effective date of the provision, isn't used in the calculation, however. Nor are periods after a qualified use of the property or temporary absences of less than two years.
Read the Bill by clicking The American Housing Rescue & Foreclosure Prevention Act link.
