Housing and Economic Recovery Act of 2008

Sponsored by Senator Harry Reid.

 

The Housing bill includes a number of provisions that will be beneficial for Nevadans

Click here to read the text of the Bill.

Click here to see a detailed display of the provisions:

First-time homebuyer credit– a new, temporary tax credit for first-time homebuyers. (A previous version of the bill limited the tax credit to buyers of unoccupied houses — newly built homes and foreclosures, but now it’s any primary residence).  The credit available is the lesser of 10% of the home’s purchase price or $7,500. The credit serves as an interest free loan which is paid back by the home buyer over the subsequent 16 years or when the home is later sold.  Here’s how it works.  Buyer purchases home for $200,000. The following year, when she files her income tax return, she has a $7,500 credit.  This is not a deduction, but a credit.  So she is allowed to reduce her income taxes by $7,500.  But she has to pay the money back over 15 years.  So if she buys a house today July 29, 2008, she would get the $7,500 tax credit for the 2008 tax year.  She would commence repaying one-fifteenth of that amount, or $500, every year for 15 years, starting with the 2010 tax year.  NOTE:  if she sells the home prior to then, she has to repay the remaining balance in a lump sum.

Mortgage Revenue Bonds– $11 billion in mortgage revenue bonds, which are tax-exempt bonds that can be used to finance affordable rental housing, loans to first-time homebuyers or refinance subprime loans. Nevada can expect to get $99.8 million in additional tax exempt bond authority to use for these purposes.

 Low Income Housing Tax Credits– a temporary increase in the amount of Low-Income Housing Tax Credits that are allocated to the states for 2008 and 2009. This temporary increase will provide more than $500,000 in additional credits to the State of Nevada to use to develop affordable housing.

 Standard Deduction for Property Taxes– a new standard deduction for 2008 for property owners who do not itemize their income tax deductions. The maximum amount that can be claimed is $1,000 for joint income tax filers ($500 for single filers).

Refinancing via FHA – Provides mortgage refinancing assistance to families from losing their homes.

Example 1

Home bought in 2005 for $200,000 – now worth $150,000. Loan is $200,000.

FHA PLAN

Borrower: Shows he can afford a loan for 90 percent of the home’s value: $135,000.

Lender: Agrees to lower the principal of the loan by 15 percent of the reassessed value: $127,500 (a 36 percent loss).

Borrower: Monthly payment of $1,470 at 8 percent balloon rate falls to $875 at 6.75 percent fixed rate.

FORECLOSURE

Borrower: Loses home.

Lender: Seizes home and pays foreclosure expenses, leaving $110,000 (a 45 percent loss).

Example 2

Home bought in 2006 for $150,000 – now worth $120,000. Loan is $150,000.

FHA PLAN

Borrower: Shows he can afford a loan for 75 percent of the home’s value – $90,000.

Lender: Agrees to lower the principal of the loan by 30 percent of the reassessed value: $84,000 (a 44 percent loss).

Borrower: Monthly payment of $1,200 at 8.9 percent adjusted reset rate would fall to $600 at 7 percent fixed rate.

FORECLOSURE

Borrower: Loses home.

Lender: Seizes home and pays foreclosure expenses, leaving $87,600 (a 41 percent loss).

Source: House Financial Services Committee.

FUN FACTS:  A provision that extends Section 8 federal housing subsidy eligibility to residents of specific properties in San Francisco, the “Nihonmachi Terrace (FHA No. 121-44284), in San Francisco, California,” and the, “property known as The Heritage Apartments (FHA No. 023-44804), in Malden, Massachusetts.”  Also there is the “Application To Certain Automotive Partnerships,” for Chrysler to ensure that it can benefit from a corporate tax incentive. The bill does not name Chrysler but rather describes an unnamed automobile manufacturer “that will produce in excess of 675,000 automobiles” from Jan. 1 to June 30, 2008.  Neat!

AUGUST 17, 2008 UPDATE:  Gordon Miles, COO for Prudential, Americana Group has provided this email update based upon H.R. 3221.  [Click here for the entire H.R. 3221 text]

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