Seattle Housing Buzz

Today several members of the industry testified before the Senate Appropriations sub-committee on Transportation, Housing and Urban Development. Lennox Scott, CEO of John L. Scott Real Estate, testified on behalf on NAR’s proposal for FHA enhancements to streamline the agency and incentives to spur homeownership.

According the Scott, FHA’s volume has increased four-fold since 2007 and now has a 30% market share. To facilitate FHA’s capacity to handle business and provide more loans, NAR has proposed the following improvements to FHA:

1. Increase funding for staffing and technology enhancements. FHA currently has about 900 on staff. With its substantial growth NAR estimates that FHA is understaff by about 160 positions. FHA’s current systems on average are 18 years old and NAR recommends that FHA upgrades its systems such as replacing the 30-year old legacy-based COBOL mainframe systems with web-based applications.
2. Monetize the $8,000 first-time homebuyers tax credit to make it available for use at closing through a collateralized loan against the tax credit. This would allow buyers to use the credit towards a down payment. NAR estimates this could incent up to 500,000 first-time home buyers into the market place, particularly when combined with FHA’s low 3.5% down payment requirement.
3. Make the higher loan limits permanent in order to provide stability in the market. Currently, the temporary loan limit for King, Pierce and Snohomish counties is $567,500.
4. Ease financing for condominium purchases through reducing the owner occupancy percentage and removing the environmental review requirement. NAR recommends reducing the 51% owner-occupancy ratio for all condo developments, thus allowing more condo buyers access to FHA financing. Additionally, removal of the environmental review will help streamline the approval process. NAR recommends that FHA accept state and local environmental review findings in lieu of a federal review.

Of the four proposed improvements the one that’ll have the most direct impact for consumers is making the $8,000 tax credit available at the time of purchase. Though this would only apply to FHA loans, FHA is becoming one of the most prevalent loan options for first-time homebuyers.

Tags: , $8000 Tax Credit, FHA, First Time Homebuyers Tax Credit

Recently, the 2009 conforming, jumbo conforming and FHA loan limits were announced.

Effective January 1, 2009 (1-Unit properties in King, Snohomish and Pierce Counties):

• Conforming loan limit: $417,000, unchanged for the 4th consecutive year
• Jumbo conforming loan limit: $506,000, currently $567,500 as part of the economic stimulus package which expires December 31, 2008
• FHA loan limit: $506,000, currently $567,500 as part of the economic stimulus package which expires December 31, 2008

The net result is that this will have, essentially, little impact except for buyers within the $506,000 to $567,500 price range. You’ll have till the end of the year to take advantage of the jumbo conforming loan rates and FHA loan programs.

In respects to FHA, effective January 1, 2009, the down payment amount will increase from 3% to 3.5%. So, there is a little incentive to save on upfront cash by buying before December 31st.

The $7,500 first time home buyer credit (aka interest-free loan) is still available through July 1, 2009.

Tags: conforming loan limit, FHA, FHA loan limit, FHA Loans, First Time home buyers credit