The “Housing and Economic Recovery Act of 2008” was signed into law yesterday by President Bush. This landmark housing legislation is aimed at ending the current cyclical downturn in the housing industry, helping home buyers and strapped borrowers and strengthening the housing finance system.

It contains several provisions to get home buyers back into the market, stop the slide in home prices, provide a assistance to borrowers facing foreclosure, improve mortgage liquidity and bolster confidence in Fannie Mae and Freddie Mac. Senate Banking Committee Chairman Chris Dodd (D-Conn.), a chief architect of the bill, called it “the most important piece of housing legislation in a generation.”

House Speaker Nancy Pelosi commented “By helping Americans avoid foreclosure, cracking down on predatory lending, protecting communities from the blight of abandoned homes, and providing generous tax incentives to encourage home ownership, this legislation will help strengthen the housing market and create jobs.”

Key elements of H.R. 3221, the Housing and Economic Recovery Act of 2008, include:

• A temporary first-time home buyer tax credit. The centerpiece of the new housing bill, this $7500 tax credit, available for any qualified purchase between April 8, 2008 and June 30, 2009, will stimulate home buying, reduce excess supply in housing markets and shore up home prices. The credit is repayable over 15 years (making it, in effect, an interest free loan).
• FHA modernization and expansion. A revitalized FHA will have greater flexibility to respond to the needs of borrowers, enable more working families to become home owners and play an important role in the mortgage markets. New permanent FHA loan limits will be the greater of $271,050 or 115% of local area median home price, capped at $625,500, and the down payment requirement on FHA loans will go up to 3.5% (from 3%).
• FHA foreclosure rescue – To address the foreclosure crisis, the FHA is given additional authority to insure up to $300 billion of mortgages to refinance loans headed for foreclosure.  Also, qualified homebuyers with problematic subprime loans could use this new refinance program. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
• GSE (government-sponsored enterprise) reform. The law reforms the regulation of Fannie Mae and Freddie Mac by instating a strong independent regulator and permanently increasing the conforming loan limit to help buyers in high-cost markets, particularly to the greater of $417,000 or 115% local area median home price, capped at $625,500.
• GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail. This will reassure both financial and global markets.
• Mortgage Revenue Bond Program. The measure gives states the ability to issue an additional $11 billion in mortgage revenue bonds, which will help strapped borrowers seeking to refinance their subprime home loans.
• National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.
• CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.
• LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient and expand the supply of much-needed affordable rental housing
• VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008
• Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.
• Seller-funded down payment assistance programs – codifies existing FHA proposal to prohibit the use of down payment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.

For more information, one can visit www.federalhousingtaxcredit.com, a new website launched by the NAHB, the National Association of Home Builders which includes a set of comprehensive questions and answers about how the credit works and how consumers can put it to their advantage.

While this legislation is too late in coming, and is probably not deep or wide enough, it is definitely a step in the right direction.  Meanwhile, to take advantage of the current soft market, contact us at by visiting our website www.DreamHomesByTheBeach.com.

“Close of Escrow”

Recently we worked with a couple who were relocating from Chicago.  As we went through the process of their purchase they became more and more confused by the procedure because it was so different from their closing in Chicago.  First of all, what is the “close of escrow”?  Very simply put, an escrow closing is the culmination of the transaction.  It signifies legal transfer of title from the seller to the buyer.  Once all the conditions of the escrow have been satisfied, the escrow officer will prepare the final documents, taking care of the technical and financial details and escrow will close.  Usually, the grant deed and deed of trust are recorded within one working day of the escrow holder’s receipt of loan funds, completing the transaction and signifying the close of escrow.

Escrow Company

So, who is the escrow company/officer?  It is a company or individual assigned to handle the facilitation of a particular escrow, including preparing escrow instructions, collecting necessary documents, making sure that all matters which have been agreed to by the parties are fulfilled, closing the escrow, disbursing funds, and getting closing statements to those involved in the transaction.  Independent escrow firms are licensed by the state of California.  Generally, buyers and sellers pay the escrow company a fee to facilitate the transaction.   Our client compared the California closing process to theirs in Chicago in which all parties were present for “the closing” in an attorney’s office.  Here, in California, we generally have no need for attorneys.

Escrow Instructions – Purpose

What are the escrow instructions and where do they come from? Quite simply, the “escrow instructions” are written documents, signed by the parties which specify the steps necessary to complete the transfer of the property.  The steps outlined in these escrow instructions are comprised of, and taken directly from, the terms and conditions agreed upon by the buyer and seller through the California Residential Purchase Agreement. Since the escrow holder can only follow the instructions as stated, and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.

Escrow Instructions – Contents 

What does a typical set of escrow instructions include?

• The method by which the escrow holder is to receive and hold the purchase price to be paid by the buyer.
• The conditions under which a lapse of time or breach of purchase contract provision will terminate the escrow without a closing.
• The instruction and authorization to the escrow holder to disburse funds for recording fees, title insurance policy, real estate commissions, and any other closing costs incurred through escrow.
• Instructions as to how insurance and taxes are to be prorated.
• Instructions to the escrow holder on the payment of prior liens and charges against the property and distribution of the net sale proceeds.

We at Geller-Meier Real Estate recognize that changes from state to state can be confusing and make a point of explaining and helping our buyers understand the California escrow process.   Our ultimate aim is to make it as smooth and painless as possible, so you can get on with the business of settling in to your new home!

For customized assistance in relocating to North San Diego County, for excellent representation in purchasing a home, for sound and intelligent real estate advice, contact Maxine and Eva.  We will guide you through the process and make it as pleasurable and painless as possible.