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Mortgage Market Update

March 2009

The Stimulus Plan and YOU!

On February 17, 2009, President Barak Obama signed the American Recovery and Reinvestment Act of 2009 into law. What does the bill, commonly referred to as the "Stimulus Plan", mean for you?

Loan Modification

About $50 - $100 billion is intended directly for foreclosure relief. Banks are being encouraged to constructively address the foreclosure problem by approving more loan modifications. The government will grant assistance to banks that will reduce mortgage payments to 31% of the borrowers’ monthly income. This will be done through rate reductions, lengthening loan terms, and/or deferring the principal balance. Those banks that do not comply will not be eligible for monetary assistance from the government. This plan will have a direct impact on homeowners who have the income but not the equity to refinance. Loan modifications are projected to receive higher emphasis in 2009.

Buyers

The administration is also looking to stimulate home sales by assisting buyers. First-time home buyers (buyers who have not owned a home in the last 3 years) who are purchasing a primary residence may be eligible for a $8,000 tax credit on purchases made since January 1, 2009. The annual income limitations for the credit are $75,000 for singles and $150,000 for joint filers. If you earn more than the specified incomes, you may qualify for a lesser tax credit. Unlike the prior tax credit, the stimulus plan stipulates that the $8,000 will not have to be repaid.

For buyers who have trouble collecting a down payment, knowing that you will receive $8000 makes it easier to enlist financial assistance from relatives or friends. Furthermore, interest rates are fantastically low, and a number of new programs have become available. Do your research! Talk to mortgage brokers and see who can offer not just the best rate, but the most suitable program for your needs. The Home Buyers Alliance is a great local resource where you can get professional guidance and evaluation of your options.

Sellers

As the tax credit - as well as record-low interest rates - will most likely encourage more buyers to enter the market, home sellers will benefit as well. This is of particular relevance to the sellers who are attempting a Short Sale, which is a notoriously lengthy and complex transaction. With more interested buyers in the market, Short Sales will likely move more smoothly to a successful close.

Whether you are a buyer, seller, or looking to prevent foreclosure, don’t miss out on the opportunity to benefit from our government’s assistance. Get in contact with your local mortgage and real estate experts to learn more about where you fit in this market.