The Housing and Economic Recovery Act of 2008

In early 2008, the Economic Stimulus Act of 2008 raised conforming loan limits in high-cost areas to $729,750 (up from $417,000); however, this provision was temporary and is set to expire on December 31, 2008.

On July 30, 2008, President Bush signed into law the Housing and Economic Recovery Act of 2008 (HERA). This piece of historic legislation will assist an estimated 400,000 homeowners facing foreclosure, many of whom reside in California, by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. Another centerpiece of this legislation is the creation of a $7,500 tax credit for first-time home buyers and the continuation of the Hope for Homeowners program. Effective October 1, 2008, the bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits.

Under HERA, the new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area's median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area's median home price, up to $625,500. Both new loan limits will be effective upon the expiration of the Economic Stimulus limits on December 31, 2008.


Homeowners May Already Be Eligible for Assistance:


Families should not wait to seek mortgage relief. Right now, homeowners can determine if they are already eligible for mortgage assistance through FHASecure, FHA's existing refinancing program. They can obtain information through either of the following options:

1. Contact a local HUD-approved housing counseling agency at HUD.gov.
2. Contact the HOPE NOW Alliance at (888) 995-HOPE.


$7,500 TAX CREDIT FOR FIRST-TIME HOME BUYERS - Features of the tax credit include:


- Ten percent of cost of home, not to exceed $7,500.
- Portion (6.67 percent of credit) to be repaid each year for 15 years. If the home is sold before 15 years, then remainder of credit is recaptured on sale.
- Any single-family residence (including condos, co-ops) that will be used as a principal residence.
- Reduces income tax liability for the year of purchase. Can be claimed on tax return for that tax year.
- Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a join return). Phases out above those caps ($95,000 and $170,000, respectively).
- Purchaser (and purchaser's spouse) may not have owned a principal residence within three years prior to purchase.
- The tax credit phases out for a taxpayer with a modified adjusted gross income of no more than $75,000 (or $150,000 for joint returns).
- This tax credit is available for qualifying homes purchased from April 9, 2008, through June 30, 2009.