The massive housing relief bill signd into law by the President, in late July, promises to improve the climate for home sales, thanks to tools that will help lift the pall that's clouded markets for two years.
The bill's centerpiece is the expansion of the FHA that will make safe and affordable federally backed mortgage financing available to borrowers with unaffordable subprime loans. With the $300billion FHA initiative, lenders will be able to get troubled loans off their books.
At the same time, the bill permanently raises the FHA and conforming loan limit to $500,000 (in Riverside County) from $417,000
Most important for credit markets, the bill authorizes the federal government to shore up secondary mortgage market giants Fannie Mae and Freddie Mac through an expanded line of credit or equity infusion in the form of purchases of the companies' stock
Along with the financial backstop, the bill beefs up oversight of Fannie and Freddie by creating new, independent regulator that will have the authority for setting the companies' capital requirements, among other things.
To help persuade first-time buyers to enter the housing market, the bill authorizes a $7500 tax credit for purchases made by July 1.2009. This is not a gift, but a loan to repaid in a number of years.
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