Stimulus and Stability - Apparently...That's the Plan!

Two major economic plans were released that will impact a lot of home owners. Even though most of those plans are still being worked out, let's see how it could impact you.

Let's start with the Economic Stimulus Plan for 2009 - It's a $787 billion stimulus bill made up of tax cuts and spending programs with the goal of reviving the economy. Believe me or no, initially it was a $1 Trillion plan, and even though it was cut down, it is still the largest anti-recession effort in history since World War II. Wow! One of the major benefits of the plan is the update of the First Time Home Buyer Tax Credit. (check my "News On The Home Buyer Tax Credit" post for more information).

No details yet, but we also expect to get some clarity regarding an additional tier for conforming loans limits. Currently conforming loan limit is at $417,000 with "conforming jumbo"being up to $474,950 for our tri-county area and $626,500 for the bay area. "Conforming Jumbo" loan rates are slightly higher than loans up to $417,000. So we'll have to wait and see if the additional tier will really happen.

Now let's go to the Homeowner Affordability and Stability Plan- President Obama's plan is to stabilize and the housing market and keep millions of home owners in their homes. It includes a Refinancing Initiative and a Stability Initiative.

The Refinancing Initiative is open to home owners who owe up to 5% or more of what the house is worth. In order to qualify for the refinance program, their current loan amount has to be under $417,000 (conforming limit) and guaranteed by Fannie Mae or Freddie Mac. "Credit worthy and responsible" borrowers would be able to refinance their mortgages in to a 30 or 15 year fixed loan based on current rates but it can not include prepayment penalties or balloon payments.

The Stability Initiative is being designed for homeowners who are struggling to pay their mortgages but can't sell their homes because of lack of equity. The goal is to reduce their monthly payment to an amount they can afford. Lenders will be encouraged to lower borrowers' mortgage payment to 31% of their income by lowering their interest rates significantly or extending the term of the loan (i.e. 30 year to 40 year). Lender could also lower the principal balances in order to make it work with the Treasure sharing the cost. Home owners do not have to be behind on their mortgages. Other incentives are also being considered including a $1,000/yr "reward" for home owners who keep their mortgages current all year for the first 5 years.

For you investors...Sorry to tell you but investment properties won't qualify for neither of the plans.

On Your Team,

Maria

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