Saturday, July 26, 2008

H.R. 3221

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

          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.