Congress left town for the July 4 recess with a half-baked cake in its legislative oven - one that has huge potential significance for the housing and mortgage markets. The unfinished work is a major relief bill designed to rescue hundreds of thousands of homeowners heading for foreclosure, pull new buyers back into the real estate arena and permanently raise conventional and FHA loan limits in high-cost markets.
The Senate is on the verge of final passage of its bill, and could do so as early as this week. The House has already passed its version. Final legislation could go to the White House later this month. Though President Bush has threatened a veto, Capitol Hill analysts say that strong bipartisan support - plus elections this fall - makes it highly unlikely he'd actually do so.
What's in the bill and what could it mean to you? If you dig into this 631-page behemoth, you might find something that directly benefits you. That's especially the case if you are:
*Thinking about buying a first home. The legislation offers federal tax credits up to $8,000 per couple - $4,000 per single - for qualified purchasers of newly constructed or resale houses. There's no cap on the total number of buyers to be assisted, plus the definition of "first-time buyer" is more generous than a literal reading would suggest. This provision alone could provide a significant stimulus and bring thousands of consumers back into the real estate marketplace.
*Saddled with a debt-laden home heading for foreclosure. The pending legislation may offer a way out for you - provided your lender agrees to participate. Even if you're behind on payments and your mortgage balance exceeds your property's value, you could end up with a new, affordable FHA fixed-rate loan.
*Searching for a home in a high-cost market. The new housing bill is certain to provide higher limits than the $417,000 cutoff for Fannie Mae and Freddie Mac that prevailed before the economic stimulus package's temporary increase of up to $729,500, set to expire at the end of this year.
The odds are the new maximum will be below $700,000 - the Senate bill calls for $625,000 for Fannie, Freddie and the FHA. House negotiators reportedly have been pushing for $688,000. But the final compromise number should be high enough to help out buyers in California, New England and the Mid-Atlantic states who otherwise could be forced to pay higher interest rates for jumbo loans.
