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Today, the Senate passed a bill many are calling the “Housing Rescue” Bill. The main purpose of this legislation is to attempt to help 400,000 homeowners avoid foreclosure while preventing the collapse of troubled mortgage companies Fannie Mae and Freddie Mac.

Within this legislation there are two components that have the potential to seriously affect your real estate business…and very soon.

The first is positive. The bill includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

Although the refund would be reduced gradually for single filers with adjusted gross incomes above $75,000 and for joint filers with adjusted gross incomes over $150,000, this is a very nice incentive for those looking to buy a home for the very first time.

Now the bad news. This legislation bans non-profit down-payment assistance programs for FHA loans.

This means Nehemiah and AmeriDream will soon be unavailable. My understanding is this ban goes into effect on October 1, 2008.

To make matters more challenging, the minimum down payment required on an FHA loan will now increase from 3% to 3.5%.

Over 300,000 people have used Nehemiah in the last decade. Nearly one in every three FHA loans today uses some form of down payment assistance. These will soon disappear. This has the potential to dramatically affect first-time homebuyers and lower income borrowers.

If you have buyers who need 100% financing, and you plan on the seller gifting the 3% down payment through a down payment assistance program like Nehemiah, you will likely lose this option very soon.

There is no word yet on when the last day to apply for Nehemiah will be. I will let you know as soon as I do.

Regardless, you want to call these buyers ASAP (like tomorrow) and tell them their time is limited.

After October 1, 2008, they will be required to put 3.5% of their own money down or that from a family member, close friend or employer.

The last time FHA banned down payment assistance programs, Nehemiah and the others sued and won. There is very little optimism that will occur this time.

Best regards,

Manuel Olivas

Realtor

Direct: 702.279-1436