“WHAT’S NEW”

On Wednesday, July 31, 2008 President Bush signed H.R. 3221, the “Housing and Economic Recovery Act of 2008.  This massive, 694 page bill will positively affect the country’s affordable housing and community development programs.  Listed below is a detailed summary of the bill’s key provisions affecting local housing finance agencies. 

Highlights of the Bill include:

• An appropriation of $4 billion in Community Development Block Grant-like funds, of which $3.92 billion is for grants to local and state governments for the acquisition, rehabilitation of foreclosed properties.

• An additional, one-time $11 billion in tax-exempt bond volume cap to enable local and state housing agencies to issue Mortgage Revenue Bonds to refinance homeowners with subprime loans who are facing foreclosure, aid first-time homebuyers, and produce multifamily rental housing.

• A permanent exemption from the Alternative Minimum Tax for tax-exempt single-family and multifamily housing bonds

• A one-time recycling of tax-exempt multifamily bond proceeds within 6 months of repayment of the conduit loan used to finance a qualified residential rental project.  The refunding bonds do not require a new volume cap allocation and must be issued within 4 years of the date of the original bonds with a maturity of no more than 30 years.

• An increase in the state Low-Income Housing Tax Credit cap by $.20 (to $2.20 per capita) for each of 2008 and 2009; the small state minimum is increased by 10% for 2008 and 2009.

• The authority for investors to use Low-Income Housing Tax Credits to offset Alternative Minimum Tax Liability.  

• Creation a Housing Trust Fund to be funded by tapping the portfolios of each of the GSE’s in an amount of 4.2 basis points for each dollar of unpaid principal of its total new business purchases. 65% of the funds are to be allocated by HUD among the states and 35% are placed in a Capital Magnet Fund to be allocated to Community Development Financial Institutions. The trust fund is expected to total approximately $500 million.  75% of the funds are targeted for production and preservation of housing for households at or below 30% of median income. 

• Increase the FHA mortgage insurance high housing cost limit to $625,000.

• Mortgages to be insured by FHA must be accompanied by a 3.5% of the appraised value of the property cash downpayment.  Family members can lend the downpayment to the borrower, which in combination with the first mortgage cannot equal more than 100% of the appraised value plus any initial service charges, appraisal, inspection, and other fees in connection with the mortgage.

• Effective October 1, 2008, seller-financed down payments are prohibited

Source-NALHFA.

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