Signed into law by President Bush on July 30, 2008, H.R. 3221, the Foreclosure Prevention Act of 2008 (the “2008 Foreclosure Act”), is another tack taken by Congress to address the present foreclosure crisis (in late 2007 our federal government enacted the Mortgage Forgiveness Debt Relief Act of 2007 on this topic - click here January 2008 blog for more discussion). With the stated goal of preventing foreclosures, the 2008 Foreclosure Act does the following
Signed into law by President Bush on July 30, 2008, H.R. 3221, the Foreclosure Prevention Act of 2008 (the “2008 Foreclosure Act”), is another tack taken by Congress to address the present foreclosure crisis (in late 2007 our federal government enacted the Mortgage Forgiveness Debt Relief Act of 2007 on this topic - click here January 2008 blog for more discussion). With the stated goal of preventing foreclosures, the 2008 Foreclosure Act does the following
o Downpayment (FHA Loans): Increases the downpayment required from a borrower from 3% to 3.5% of the appraised value of a property.
o Seller-Funded Down Payment Assistance (FHA Loans): For mortgages approved on or after October 1, 2008, prohibits any funds for the downpayment from: (1) the seller or any other person or entity that financially benefits from the transaction; or (2) any third party or entity that is reimbursed, directly or indirectly, by any of such parties.
o Reverse Mortgages (FHA Loans): Requires the borrower of a reverse mortgage to receive counseling from an independent third party that is neither associated with nor compensated by a party involved in: (1) originating or servicing the mortgage; (2) funding the loan underlying the mortgage; or (3) the sale of annuities, investments, long-term care insurance, or any other type of financial or insurance product. Declares that a Borrower shall not be required by the mortgagee to purchase insurance, annuity, or other additional product as a prerequisite to eligibility for a mortgage.
o FHA Loan Limit: For FHA loans originating after December 31, 2008, increases FHA loan limits to the greater of $271,050 or 115% of local area median home price, capped at $625,500.
o VA Loan Limits: For VA loans from now through December 31, 2008, increases loan limits.
o Protection for Servicemembers in Foreclosure: Amends the Servicemembers Civil Relief Act to increase to 9 months (from 90 days) the period of: (1) protection against mortgage foreclosure proceedings; and (2) the stay of proceedings and adjustment of mortgage obligations. Sunsets such provisions on December 31, 2010.
o Redevelopment of Abandoned and Foreclosed Homes: Makes available funds for assistance to state and local governments to redevelop abandoned and foreclosed homes and residential properties (setting forth low and moderate income requirements).
o New-Homebuyer Tax Credit: For a qualified first-time homebuyer of a principal residence on or after April 9, 2008 and before July 1, 2009, provides a refundable tax credit equal to the lesser of 10% of the purchase price or $7,500 ($3,750 for married individuals filing separately).
o Standard Deduction for Real Property Taxes: For taxable years beginning after December 31, 2008, a taxpayer who does not itemize their taxes will be able to take an additional real property tax deduction of up to $500 ($1000 for joint returns) for state and local real property taxes.
o Reduced Principal Residence Exclusion for Non-qualified Use Periods: For sales after December 31, 2008, the principal residence capital gains exclusion (Section 121 exclusion) will not apply to so much of the sale or exchange of the property as is allocated to periods of nonqualified use. A “period of nonqualified use” is defined as any period after December 31, 2007 during which the property is not used as the principal residence of the taxpayer of the taxpayer’s spouse or former spouse.