The Housing Stimulus Package Continued

August 25, 2008 · Lee Ginsburg

This is my third and probably final thought on the recent Housing Stimulus Package.

http://www.pruvoices.com/2008/08/housing-stimulus-package-i-dont-think-so/
http://www.pruvoices.com/2008/08/is-this-new-stimulous-package-going-to-help-the-bay-area/

The FHA foreclosure rescue is a great idea but I don’t think it is practical, at least not in the Bay Area Market that I am familiar with. The FHA will offer to qualified buyers a new fixed rate loan at 90% of today’s market price for the home they are living in and that they own and owe considerably more money. With this program the owner shares the future appreciation with the FHA. This adds to family stability and less homes on the market and gives the family to gain some equity. I think the original lender will lose more under this than with the foreclosure process but it might be easier, quicker, look better on their books and they also gain a new guaranteed loan. In my opinion too many ifs to make this work in large numbers but the thought is GREAT.

Seller funded downpayment assistance programs are gone by Oct. 1, 2008. I will get grief from many in my industry but I am glad to see them go by the wayside. It was money laundering 101. I am a firm believer property owners must have some “skin” into the deal. This type of program was used when the seller contributed money to a non-profit organization and in return the non-profit contributed equal dollars to the buyer’s down payment. This inflated the selling price by the contribution amount and the buyer had nothing at risk; nothing to lose. I believe saving for a downpayment helps learn financial discipline that is needed as a homeowner. With family gifts for a downpayment buyers still have to face the family and in most cases is good enough “skin” in the deal.

The same Housing Stimulus Bill allows funding for communities to purchase foreclosed homes. I think it is a great idea to revitalize neighborhoods. Not sure of all the red tape involved but I look forward to seeing it in action.

Where is all this money coming from? You and Me. Under present law if you sell a home that was your primary residence for two of the last five years tax was avoided on the first $250,000 of gain ($500,000 if married). Now to help pay for this housing mess You will owe tax for the period you did not live in it. This is a big hit to investors, and second or vacation homeowners. On the bright side there are many exceptions. Time prior to Jan. 1, 2009 that you did not live in it will not be counted. If you have a property that was your primary residence for 2 or the last 5 years you might consider selling in 2008. Speak to your Realtor and Tax advisor.

Overall the package is a help. I believe if they had more people in the decision making process whom are involved on a daily basis with this housing crisis rather than politicians we could have come up with better use of the money. But let’s be happy with what we got. Every bit helps.

For additional information click on:
www.leesellsmore.com
http://lginsburg.prucalbayarea.com/admin/index.php?module=Sphere_SiteSettings&action=index&tab=pages&do=edit&page=housingstimulusbill

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/24/BURG11TT5B.DTL&hw=James+Temple+Carolyn+Said&sn=002&sc=636

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Filed Under F A Q, Neighborhood News, Real Estate in the News