While the newly-signed Federal housing package won't work any miracles overnight, it should help California move towards a more comfortable market. By insuring up to $300 billion in refinanced mortgages, putting new caps on Fannie and Freddie-backed loans, and creating $15 billion in housing tax breaks, the great Housing and Economic Recovery Act of 2008 could flush foreclosed homes from the market so that those who want to buy can, and those who want to sell will do so (hopefully) sooner than later. It's not about miracles, says the Fed— it's about getting the market back on its feet. Here's the breakdown:
· Starting in October, struggling homeowners will be able to secure cheaper, fixed-rate loans from the FHA, who will guarantee the mortgages if the lender agrees to take losses on the original loan; the borrower must agree to hand over a portion of the home's future appreciation to The Man. Sounds sneaky.
· Fannie and Freddie can pay more for loans in "high cost areas." Up to $625,000 from from $417,000 previously. "That means people trying to buy or refinance a home will often secure a better interest rate." Good news for buyers in expensive California.
· The $15 billion in housing tax breaks includes $7,500 for first-time buyers, but are actually more like $15 billion in housing loans. That $7,500 needs to be paid back, but it should help encourage new buyers and create a little market stimulus.
· What the housing package could mean to you [SF Gate]
· Morning Mortgage Meltdown: Bush Bails Fannie and Freddie [Curbed SF]