Orlando Florida Real Estate Blog

The Senate today approved an $838 billion economic stimulus bill that includes a $15,000 homebuyer tax credit, just hours after President Barack Obama's new Treasury secretary unveiled a multitrillion-dollar financial stability plan that includes $50 billion for foreclosure prevention programs.

The financial stability plan may also lead to an expansion of existing efforts by the Federal Reserve to drive down mortgage interest rates by buying mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae.

The version of the economic stimulus bill passed by the Senate in a 61-37 vote relies less on government spending and more on tax cuts to kick-start the economy than the version passed by the House Jan. 28 Only three Republicans voted for the bill in the Senate –

The House version of the bill would restore the upper limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs to $729,750 in high-cost housing markets, where they stood for much of 2008 before being reduced to $625,500 -- a step endorsed by many real estate industry groups.

The House version of H.R. 1 also contains another provision backed by the housing industry -- elimination of the repayment requirement on an existing $7,500 tax credit for first-time homebuyers that is scheduled to sunset on July 1. But the Senate version of H.R. 1 would go farther, increasing the tax credit to $15,000 and allowing all homebuyers purchasing a principal residence within a year of the bill's enactment to claim it on their 2008 or 2009 returns.

The National Association of Home Builders welcomed the Senate's move, saying a $15,000 tax break for all homebuyers could generate nearly 500,000 home sales and create more than 255,000 jobs.

NAHB Chairman Joe Robson said the enhanced tax credit would be "a powerful incentive for homebuyers to get off the sidelines" and urged Congress to make sure the full $15,000 tax credit is included in the final stimulus plan.

In a separate development, Treasury Secretary Timothy Geithner today released details of the Obama administration's new financial stability plan, a successor to the much maligned Troubled Asset Relief Program (TARP).

Obama's Mortgage Relief Could Bailout 9 Million Homeowners

The President Barack Obama administration's "Homeowner Affordability and Stability Plan" could help as many as 9 million struggling homeowners, but largely those in lower-cost housing areas. The $275 Billion Plan, with a March 4 rollout, includes a refinancing program for "responsible" borrowers who haven't missed payments and whose loans are larger than the value of their homes, and a loan modification provision with incentives for lenders to voluntarily modify certain mortgages. Many Californians and others in high cost areas may not see much immediate relief but federal aid earmarked for those higher-cost areas could come later.

Refinancing Under the refinancing provision, homeowners with less than 20 percent equity in their homes, who now find it difficult -- if not impossible -- to refinance, will be able to get new loans at lower interest rates provided the new note doesn't exceed 105 percent of the home's value. A refinanced mortgage replaces the old loan with a new one. The provision targets 4 to 5 million homeowners. Struggling homeowners in California and other high cost housing markets will benefit less from the plan because the provision only applies to mortgages held by Fannie Mae and Freddie Mac. During boom times Fannie Mae and Freddie Mac loans were only up to a maximum of about $417,000. The limit was temporarily raised to $729,750 in 2008, when fewer people were buying. This year, the limit went back to $625,000. The latest federal economic stimulus package (American Recovery and Reinvestment Act), which Obama signed in February, returned the limit to $729,750, at least for 2009. An estimated 60 percent of the home loans made in California in 2006 and 2007 were larger than Fannie and Freddie loan limits. During 2008 about 33 percent of home loans were above those so-called "conforming" levels, according to the California Association of Realtors. Other high-cost regions experienced varied levels of "non-conforming" loans. "When I saw 'Fannie Mae and Freddie Mac' I said his (President Obama's) team needs to come to Silicon Valley," said Quincy Virgilio, president of the Santa Clara County Association of Realtors. "This isn't going to help many people here," he added. Virgilio said the bulk of California's home-owning population lives in major metropolitan areas where housing costs are high.

Loan modifications The loan modification part of the plan targets 3 to 4 million "at-risk" homeowners, those with a high mortgage debt-to-income ratio and those with mortgages larger than the value of their home or "under water." A loan modification, unlike a refinance, changes the terms of the existing loan without writing a new one and could serve higher-cost housing markets better than the refinance plan. Also called a "workout," this provision is open to anyone including those who haven't missed payments, but may be at risk of missing payments. A modification is designed to get payments down to 31 percent of the homeowner's income. That could be accomplished by a reduction in the interest rates or principal, or an extension of the term of the loan, or perhaps a combination. The modification plan is open to anyone with any loan that has a balance under Fannie Mae and Freddie Mac limits, which now as high as $729,750. The modification program, also designed to standardize a hodge-podge of modification efforts by lenders, also comes with incentives for both homeowners and lenders. Loan services get up to $4,000 for modifying mortgages and borrowers got a principal reduction of up to $5,000 over five years for paying on time.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Fannie Mae modified a policy that allowed real estate investors to have only four financed properties. The number can now be five to 10, depending on whether certain eligibility, underwriting and delivery requirements are met. Florida Association of Realtors® (FAR) President Cynthia Shelton raised the investment issue with Fannie Mae officials last week.

“Many of our members have voiced concerns about Fannie Mae limiting investors to four properties,” says FAR Vice President of Public Policy John Sebree. “This comes as good news.”

The change is noted in a just-released update of Fannie Mae’s “Multiple Mortgages to the Same Borrower Policy.” The change is effective March 1. To qualify, borrowers must meet Fannie Mae’s criteria. They cannot, for example, have a history of recent bankruptcy, or a delinquency payment over the past 12 months.

Fannie Mae offers more information about its new policy in Announcement 09-02, released on Friday. To download the policy guidance (PDF format) and get more information on qualifying and underwriting, go to: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0902.pdf

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Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit http://OrlandoShortSaleExpert.com or www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.