The Federal Housing Administration "FHA" announced this week several significant changes to the program.  Among the changes are  i) In order to qualify for a down payment of 3.% the minimum credit score has been raised to 580, with scores below 580 requiring a 10% down payment; ii) The upfront mortgage insurance premium will be raised to 2.25% of the loan amount from 1.75% (this fee is typically financed into the loan amount; and iii) The amount allowed for seller concessions will be reduced from 6% to 3%.

The most significant of these changes is the increase in the mortgage insurance premium which will raise the cost of FHA loans for all borrowers.  Even with these proposed changes, FHA loans remain the main/best option for anyone seeking a loan will less than 20% down or 20% equity.  Currently these changes are scheduled to go into effect in the spring or early summer.

This is another reason potential homebuyers are being encouraged to move quickly with interest rates still low,  the home buyer tax credit scheduled to expire in the spring and with the changes discussed above expected to take place in the spring or early summer.

There is consensus agreement among most economists, analysts and market watchers that mortgage interest rates will rise in 2010 and the only question is when and by how much.  The majority view as we enter 2010 is that rates will rise gradually and end the year at 6% or slightly below for a 30 year fixed rate mortgage (2009 will end with 30 year fixed rates at approximately 5.25%). However, there are forecasts that have mortgage interest rates rising as high as 7% by the end of 2010.

Interest rates began 2009 at approximately 5.5% for a 30 year fixed rate mortgage, fell as low as 4.5% at various times during the year, and were consistently around the 5% level throughout most of the year. There was a great deal of weekly and daily volatility in interest rates in 2009. This volatility is likely to continue in 2010, especially early in the year, due to several factors.

While the Federal Reserve has announced its intention to keep short term interest rates low for the foreseeable future, there are many other variables that will impact mortgage rates in 2010. First, since 2008 the Federal Reserve has purchased Mortgage Backed Securities in the secondary market, approximately $1 Billion to date. This program has served to stabilize the mortgage market and mortgage interest rates, and many believe interest rates were at artificially low levels throughout 2009. The purchase program is scheduled to expire in March 2010 and the Mortgage Backed Securities market will be on its own. There is serious doubt whether, and to what extent, private capital will step in to buy these securities when the Federal government stops. If there are not purchasers, rates will have to rise in order to attract private capital. If the Federal Reserve extends the program or there is sufficient private capital to sustain the Mortgage Backed Securities market, mortgage interest rates may not rise to the degree that some anticipate.

A second factor is that an improving economic environment will at some point lead the Federal Reserve to raise its short term targets for interest rates to head off inflationary pressures. Such an action will lead to an increase in interest rates across the board. Lastly, Government borrowing continues to grow at an unprecedented rate and as more debt is issued the risk is that investors will likely demand higher rates in order to continue to purchase Treasurys.  If the recovery is slower than anticipated or the government curtails the pace of borrowing that occurred in 2009, interest rates will likely not rise as quickly or as high as currently anticipated.

The financial markets are forward looking six to nine months and given the degree of uncertainty surrounding some of these events, the expectation should be that interest rates will rise in anticipation of these events rather than as a direct result of any specific actions by the Federal Reserve or any economic results that are announced. This factor combined with the termination of the Fed purchase program means that we will likely see mortgage rates start to rise early in 2010. At the end of 2009 there were definite signs of this happening as mortgage interest rates rose approximately 1/2% in the final two weeks of the year.  

There are a significant number of Adjustable Rate Mortgages (ARMS) that will adjust in 2010 and 2011. Many borrowers will need to closely evaluate whether it is advisable to refinance into a fixed rate mortgage before rates begin to rise rather than waiting until after interest rates begin to rise.

It is harder to predict the impact of higher rates on purchase transactions although it is clear that as rates rise, affordability will decrease. Often when rates begin to rise, potential purchasers are motivated to move with more urgency in order to lock in rates before they move higher. At this point, higher mortgage interest rates are just another variable that could have an impact on the overall direction of the real estate market.

The United States Senate has extended the Homebuyer Tax Credit.  The agreement reached in the Senate would extend the time to qualify for the credit as well as expand the eligibility for the credit to more than just first time homebuyers.  The extension has the following features:

1. The expiration date is extended from its original expiration date of November 30, 2009.  The credit is available for a taxpayer who enters into a binding written contract by April 30, 2010 and closes on the purchase by June 30, 2010.  In this case the maximum credit will remain at $8,000;
2. Taxpayers who have lived in the same principal residence for five of the last eight years will be treated as first time homebuyers eligible for the homebuyer tax credit.  In this case the maximum tax credit available will be $6,500;
3. The income limits for full qualification have been raised from $75,000 for single taxpayers and $125,000 for married taxpayers to $125,000 for single taxpayers and $225,000 for married taxpayers;
4. The credit will be available for homes with a purchase price of $800,000 or less; and
5. For any qualifying purchase after December 31, 2008 the taxpayer may elect to treat the purchase as made on December 31, 2008 in order to claim the tax credit on the 2008 tax return.

With an extension and expansion of the tax credit, housing prices at their most afforadable level in years and interest rates near historic lows; the environment remains attractive for those seeking to purchase a home in order to take advantage of the tax credit. 

If you're considering buying a home or refinancing an existing loan, you'll quickly find out that lenders today seem to be a picky and demanding bunch when it comes to loan approvals. Even well-qualified  borrowers are expected to jump through hoops when qualifying for financing.

Don't let this discourage you. Here are some tips and suggestions to assist with you with what your lender is looking for on a loan application and how to make the best impression possible.

• Make sure that your income is more than adequate to cover interest, principal, property taxes and homeowner's insurance. Rule of thumb is 40% of your total income should be spent on housing. This percentage can at times be higher dependent upon individual circumstances.
• Don't be late on your bills. Your track record of paying debts, incurring debts and your credit card balances are major factors in your credit score and credit history. Don't make any major purchases before applying for a loan or rack-up any additional credit card debt. Avoid closing accounts as this lowers your credit score.
• The home's appraised value is also a deciding factor and is something to be considered whether purchasing a home or refinancing. If you have all of your other ducks in a row but your appraisal comes in below your loan value, your deal may fall through.
• Having an adequate down payment (or equity) is a valuable key in obtaining your loan. There are many options available when it comes to your down payment as well as several types of loans for refinancing.

Good credit and a stable income are no longer the only requirements that need to stand out in the loan application process. All of the areas listed above factor into qualifying for a loan.

Another essential asset in this process is your lender. Your lender is experienced and knowledgeable and can assist you in many areas of the process as well as provide you with the guidance you may need in obtaining a low interest rate loan.  With rates at historic lows don't be discouraged by a few hurdles in the process.

With fall just around the corner, and with the $8,000 First Time Homebuyer tax credit set to expire on November 30, 2009, many buyers are rushing to finalize their deals.

With the process of searching for and getting a contract on home, as well as the process of qualifying for a mortgage taking up to two months to complete; anyone hoping to cash their $8,000 check should have a contract in place by mid October.

Those sitting on the fence about whether this is the time to buy should consider the following:

• While there is current speculation that the credit could be extended, there is a fair amount of doubt regarding whether Congress will act given other legislative priorities, the concern about government spending and the unpopularity of these types of stimulus programs. 
• The housing inventory continues to decline while housing prices have stabilized nationally and in certain markets have begun to rise;
• Over the past three months the real estate market in the Denver Metropolitan is one of the top 10 markets in the country.  Based on July data home sales have risen for 5 consecutive months and prices have risen in the May-July period.
• Interest rates remain low with 30 year fixed rates at or below 5.5% and the ability to qualify for a mortgage is obtainable for many.

Anyone considering purchasing a house in the next 12 months may want to consider whether buying before November 30, 2009 is appropriate in order to obtain the following benefits that may not exist or be as favorable next year:

• $8,000 cash;
• Affordable housing prices;
• Low interest Rates.

In February of 2009, Fannie Mae introduced two new loan programs called HomePath and HomePath Renovations.  These two programs are specifically for borrowers purchasing designated properties owned directly by Fannie Mae (REO properties acquired through foreclosure).

Fannie Mae has greatly expanded the number of properties that qualify for HomePath and these properties can be accessed and viewed at the HomePath website at www.homepath.com.  Due to the very favorable pricing and financing available, these properties do not stay on the market for very long and acquiring a HomePath property can be competitive if it is a desirable property. 

The main charcteristics of the program are as follows:

• Up to 97% financing allowed on owner-occupied properties;
• Up to 90% financing allowed on investor owned properties;
• Mortgage Insurance is not required;
• An appraisal is not required; and
• There are no declining market restrictions

The HomePath Renovation program has all the characteristics of the HomePath program, plus it allows for the financing of not only the purchase price but also moderate renovations.  This means that costs to improve the property can be borrowed as part of the purchase financing.  These funds are held in escrow and disbursed as the renovations are completed.

The renovation cost cannot exceed the lessor of 20% of the improved value of the property or $30,000; and all renovations must be completed within 3 months of purchase.  All improvements must be completed by a contractor and do-it-yourself costs are not allowed.  The Renovation program has the same guidelines as outlined above for the standard program, except the Renovation program only applies to owner occupied properties.

If you would like more information on either of these programs contact us.

In early April of 2009, Fannie Mae introduced a new loan program called the Home Affordable Refinance Program (HARP).  This program provides borrowers with acceptable payment history the opportunity to refinance, even if their home has declined in value.  The key features of the program are as follows:

• Loan must currently be owned by Fannie Mae to qualify;
• Maximum loan is 105% of the current value (there are restrictions on this guidelines so careful review is required)
• Applies to owner occupied and investment properties;
• No warrantability requirements for Condos;
• Not subject to declining market restrictions;
• If eligible, no mortgage insurance
• Lower credit scores are allowed

While there are many situations where this program may apply depending upon the specific circumstances, I believe there are 3 specific situations where a homewoner will benefit:.

1. Where the homeowner orginally put 20% down but due to a decline in value the loan to value now exceeds 80% and the homeowner is now required to pay monthly mortgage insurance.  Under this program mortgage insurance will not be required;
2. Any loan where the borrower does not currently pay mortgage insurance, regardless of the loan to value; and
3. Any investment properties that meets the first two requirements.

The major restrictions under this new program are 1) the loan must be currently owned by Fannie Mae; 2) subordinate financing (i.e. second mortgage) cannot be paid off; 3) no new subordinate financing is allowed; and 4) If the current loan has mortgage insurance there will be limited eligibility.

Not surprisingly there are are many requirements that need to met for eligibility under this this program and consultation with a qualified mortgage professional is necessary.  We would be happy to discuss this program and consult with you on your eligibility for this program. 

Qualifying taxpayers who buy a home in 2009, prior to December 1, can receive a refundable tax credit up to $8,000.  The credit can be claimed on the 2008 tax return if not already filed or on the 2009 tax return.

The tax credit was originally enacted in 2008 and was recently revised.  The major revisions were the amount was increased from $7,500 to $8,000 and that a qualifying taxpayer is not required to repay the credit if the home remains his or her primary residence for 36 months.  Otherwise eligibility remains the same.  In order to qualify for the tax credit the taxpayer must be a first time homebuyer.  A first time homebuyer is defined as someone that has not owned a primary residence during the three year period ending on the date of purchase.  Additionally the tax credit is phased out for taxpayers with an adjusted gross income of $75,000 or more for single filers or $150,000 or more for joint filers.

Lastly, the IRS recently issued clarification that taxpayers who purchased a home in 2008, before the law was changed, will remain subject to the old rules.  Namely, the credit is limited to $7,500 and they will be required to repay the funds over 15 years.  

With mortgage interest rates falling bact to the 5% level and in some cases below many who thought they may have missed the opportunity to refinance earlier this year are being given another opportunity.  Following is a brief discussion of the process and the issues to consider.  

Before signing the paperwork we always work with our clients to provide an analysis that allows them to more easily determine whether refinancing fits their situation.  This type of analysis allows them to make a good financial decision rather than be swayed merely by an interest rate that sound good or the monthly savings.  After this analysis, I estimate that between 30% and 40% determine that refinancing is not currently the right move.  Even if they don't proceed, they usually find the process very helpful and come away with a much better understanding of how to manage their mortgage.

You will hear many people say that refinancing makes sense if you can get a 1% reduction in your interest rate (i.e. from 6% to 5%).  As is often the case with financial advice that can be very complex, this often repeated advice is over simplified and is, at best, only useful as a general guide.

For example, a 1% reduction in a $100,000 mortgage will result in a monthly savings of $63 while a 1/2% reduction in a $400,000 mortgage will result in a monthly savings that is twice as much, $127.  There are many variables to consider that may lead to the conclusion that it makes little financial sense to refinance the $100,000 loan and that it is advantageous to refinance the $400,000 loan.

Among the factors that should be considered are the following:

• What are the monthly savings associated with the refinance?
• What is the cost of the refinance?
• Will the cost of the refinance be added to the loan, paid out of pocket, or added to the rate?
• How many years remain on the existing loan and what is the length of the new loan?
• How long do you expect to remain in the home?
• Does the old loan (or the new loan) require monthly Mortgage Insurance?
• How will the monthly savings be used?

In addition to the above factors, there are several that may by themselves make refinancing attractive regardless of how much the interest rate decreases or increases:

• Converting an Adjustable Rate Mortgage to a Fixed Rate Mortgage;
• Converting an interest only or negative amortization loan to a fully amortizing loan;
• The ability to reduce or eliminate mortgage insurance;
• Elimination of a high rate second mortgage or the consolidation of other debts; or
• The ability to access cash in order to meet important financial needs and goals.

As is the case with most financial decisions, it is critical to perform the analysis necessary in order to properly evaluate all of the available options so that a good financial decision can be made.

1. How does a tax credit work?

Tax credits are special provisions that reduce income tax liability on a dollar for dollar basis. Credits are claimed on an individual's income tax return. In this case, Congress has created a tax credit for first-time homebuyers. The maximum credit amount is $7500. Thus, if after figuring out all the income items and exemptions and making all the required additions, subtractions, deductions and other items on a tax return a person had total tax liability of $8000, a $7500 credit would wipe out all but $500 of the tax due.

2. So in the case of this new homebuyer tax credit, what happens if the purchaser is eligible for a $7500 credit but their entire income tax liability for the year is less than $7500?

This new tax credit is a so-called "refundable" credit. Thus, if the actual tax liability was $6000, the purchaser would receive a tax credit refund of $1500. The refundable amount is the difference between $7500 credit amount and the amount of tax liability. (The term "tax liability" refers to the actual amount of tax computed on the tax return once all the computations are complete. The individual may already have "paid" their tax liability through withholding, by means of estimated taxes or simply by a check that makes up the difference when there is a shortfall of withholding or estimated tax payments. Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.)

3. Who can use the new tax credit?

Only first-time homebuyers are eligible to use the credit. A first-time homebuyer is defined as an individual who has not had an ownership interest in a principal residence in the previous three years. The 3-year period is measured as of the date of the purchase of the eligible principal residence.

4. Is there an income restriction?

Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals who's Form 1040 filing status is Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Individuals who file a Joint return may have income of no more than $150,000.

5. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?

Not always. The credit has a phase-out so that the closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. For this new credit, the credit amount is gradually reduced as an individual's income reaches $95,000 (single return) or $170,000 (joint return). Individuals with income above $95,000 ($170,000 joint return) will receive no tax credit.

For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown:

Couple's income:   $165,000                                                                                       Income limit:  $150,000                                                                                                  Excess income:  $15,000

The excess income amount ($15,000 in this example) is used for form a fraction. The numerator of the fraction is the excess income amount. The denominator is $20,000 (specified by the statute).

In this example, the disallowed portion of the credit is 75% of $7,500 or $5,625. ($15,000/$20,000 = 75% x $7,500 = $5,625)

Stated another way, only 25% of the credit would be allowed. In this example, the allowable credit would be $1,875. (25% x $7,500 = $1,875)

6. Is the amount of the credit tied to the price of the home?

Yes. The credit is for 10 percent of the cost of the home, up to a maximum credit of $7,500. If a home costs $65,000, the allowable credit would be $6,500. If a home cost $120,000, the allowable credit would be $7,500. The amount of the credit is the same for all taxpayers, married or single.

7. What's the definition of "principal residence?"

Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling.

8. Are there restrictions on the location of the property?

Yes. Eligible property must be located in the United States. Property outside the U.S. is not eligible for the credit.

9. Are there restrictions related to the financing for the mortgage on the property?

Yes. If the financing is obtained by means of mortgage revenue bonds (i.e., through a tax-exempt bond-related financing program offered by a state housing agency), then the purchaser is not eligible for the tax credit.

10. Why do some news reports call the credit an interest-free loan?

Unlike most other tax credits, this tax incentive must be paid back. All eligible purchasers who claim the credit will be required to repay it over 15 years. The statute specifies that the repayment amount will be 6.67% of the credit amount each year. Thus, a buyer who qualifies for a full $7,500 credit will repay $502.50 each year. There will be no interest charge on outstanding balances. (See "Repaying the Credit" below.)

11. How do I apply for the credit?

There is no pre-purchase authorization, application, or similar approval process. Eligible purchasers will simply claim the credit on the appropriate IRS Form 1040 tax return and/or any special forms the IRS might devise. In many, if not most cases, the IRS will be on notice that a purchase has occurred because the settlement officer at the time of purchase is required to report the transaction.

12. So I can't use the credit amount as part of my down payment?

Presently, there is no mechanism available for claiming the credit any earlier than the 2008 tax return that will be filed in 2009. Congress tried to devise a mechanism that would allow pre-funding of the credit, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

13. So there's no way to get any cash flow benefits before I file my 2008 tax return?

Any first-time homebuyers who believe they would be eligible for all or part of the credit may wish to modify their income tax withholding (through their employers) or to adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided, and give the completed Form W-4 back to the employer. In many cases, their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.

14. I made an offer on a home that was accepted on March 27, 2008. We went to settlement on April 12, 2008. Do I qualify for the credit (assuming I meet all the other requirements)?

Yes. A home is considered as "purchased" when all events have occurred that transfer the title from the seller to the new purchaser. If a property goes to settlement on or after April 9, 2008, then an otherwise qualified buyer would be eligible for the credit. Similarly, closings must occur before July 1, 2009, for purchases to be eligible for the credit.

15. If I don't make an eligible purchase until 2009, do I claim the credit when I file my 2009 tax return in 2010?

You'll have a choice. Qualified first-time homebuyers who make their purchase between January 1, 2009, and before July 1, 2009, are permitted to make an election to treat the purchase as if it had occurred on December 31, 2008. This election allows them (depending on the timing of the sale) to claim the credit on their 2008 tax return that is due on April 15, 2009. They may also elect to file their 2008 tax return after April 15 by filing for an automatic extension and claim the credit on the extended 2008 return. If they file their 2008 return before they have purchased the home, they may utilize this election and file an amended 2008 tax return. Of course they will always have the option of claiming the credit for the 2009 purchase on their 2009 return filed in 2010.

16. My sister and I are both single and want to purchase a home together. Will we each receive a $7,500 credit?

No. The purchase of a residence will generate a tax credit amount that will total up to no more than $7,500 no matter how many unmarried purchasers are buying the house.

17. My fiance and I bought a house on June 1, 2008. We'll get married in 2009. I owned a home in 2006. He's never owned a home. Will we get a credit? For 2008? For 2009?

It's pretty clear that you will not qualify for the credit for the 2008 purchase because you owned a home after June 1, 2005 (three years before the date of purchase). But since you and your fiance were single when you made the purchase, he may qualify for the credit since he didn't own a home after June 1, 2005. If he's otherwise eligible, then he may be able to take the credit because you'll both file your tax return as Single for 2008. If you got married in 2008, neither of you could claim the credit. When purchasers file a joint tax return (as you would if you got married in 2008), both must be first-time homebuyers. Your 2009 marriage isn't relevant for this purpose.

18. My sister and I wish to purchase a home together. She previously owned a principal residence but sold it 2 years ago. I've never owned a residence. Can I qualify for a partial credit?

Possible. The statute is somewhat ambiguous. Note though, that Treasury will no doubt provide guidance to clarify this ambiguity. As it presently stands, the statute specifically provides that for a married couple to be eligible for the credit, both must be first-time homebuyers. Similarly, the statute provides that if a married couple files their tax return as Married Filing Separate, then the credit is limited to $3,750 each. By contrast, the statute directs the IRS to determine how the credit can be shared when two or more unrelated individuals purchase a home. In that case, the statute does not specify whether all the unrelated purchasers must be first-time homebuyers. You'll want to check with a tax advisor.

19. I made an eligible purchase of a principal residence in May 2008. My brother, also a first-time homebuyer, wishes to move in with me next year and purchase a partial interest in the home before July 1, 2009. Will he qualify for the credit as well?

No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt, or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer. If you, as the first-time homebuyer, had bought the property from, for example, your grandparents, you would also be disqualified from using the credit.

20. What is the repayment feature of the credit?

The repayment feature of the credit is similar to a recapture provision: in some circumstances, the tax system takes back all or part of the tax benefit. In this case, there is no precedent for repayment of a tax credit created for individuals, so not much is known about how the repayment will occur, how it will be reflected at settlement (or on sales forms) or how the IRS will collect and enforce the payments. The repayment is the equivalent of converting the tax credit into an interest-free loan.

21. What are the terms for repayment?

The credit amount is repaid in increments of 6.67% of the credit amount over 15 years. For individuals who take the full $7,500 credit, the repayment will be about $502.50 a year. Individuals who claim a credit of less than $7,500 will also have a 15-year repayment period and will pay 6.67% of their credit each year. For example, an individual who claims a credit of $6,000 will repay $400.20 a year ($6,000 x .0667). There is no interest charge applied to outstanding balances.

22. When do I make the payment?

The mechanics are not specified. Repayments for credits claimed on 2008 tax returns will go into effect for the 2010 tax year. As a practical matter, then, repayments of credits taken in 2008 will not actually start until 2010 returns are filed in 2011. Repayments for credits claimed on 2009 returns will go into effect for the 2011 tax year and reflected on 2011 returns filed in 2012.

23. Will the IRS put a lien on my property for the amount of the credit repayment?

The statute does not grant the IRS that authority. The rules for tax liens are quite specific about when the IRS can put a lien on property. It is not yet known how the IRS will identify and stake its claim to the repayment.

24. What if I sell my house before the 15-year repayment period is complete?

When the person who used the credit sells the home, any amount of tax credit that has not been repaid will be due in the year of sale. For example, if an individual still "owed" $4,000 in repayments and realized $25,000 of proceeds from the sale, the $25,000 of seller proceeds would be reduced to $21,000 and $4,000 will be remitted to the IRS. Again, the mechanics are unknown.

25. What if there's very little gain (or even a loss) on the sale and the proceeds won't cover the repayment amount?

If the gain on the sale is less than the amount that must be repaid, part of the liability is forgiven. For example, if the individual still "owed" $4,000 but the gain on the sale was only $3,500, then the seller would not be required to repay the IRS the $500 shortfall. If there was no gain or even a loss, then the remaining $4,000 would not be repaid.

26. Are there any other exceptions to the repayment rules?

Yes. If the person who utilized the credit dies before the full credit amount has been repaid, then any balance that remains unpaid is disregarded. Special rules make adjustments for people who sell homes as part of a divorce before the credit has been fully repaid. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency).

27. If I received a refund of a portion of the tax credit because my total tax liability was less than the amount of my tax credit, do I have to repay the amount of the refund?

Yes. You would have received the maximum economic benefit of the credit amount when you reduced your tax to zero and also received a refund of the balance. Thus, you would repay the full amount of the credit for which you were eligible. Again, there are no details that specify the mechanics for tracking those amounts.

I want  to highlight two mortgage programs, neither of which are new although you may not have heard of one of them.  Both loan programs provide substantial benefits for those who qualify in today’s more complex mortgage environment.

On March 5, 2008 the Federal Housing Authority issued new mortgage loan limits that will apply for FHA Loan products as well as Fannie Mae and Freddie Mac loan products (conventional loans).  These increases to the loan limits are pursuant to the recent stimulus package that was recently signed into law by President Bush in early February. 

The maximum loan amount will vary by state and by county.  However, the effect will be significant particularly for areas where the conventional loan limit has risen above the previous maximum amount of $417,000.  This will allow many borrowers and homeowners to avoid Jumbo Loan classification allowing them to qualify for conventional loans that have and interest rate of 1% to 1.5% less.   

In certain high cost areas the maximum loan is now as much as $729,750 (i.e. California for example) for both FHA and Conventional loans.  However, for the six county Metropolitan Denver MSA the new loan limits for FHA is $406,250 and the Conforming loan limit has remained unchanged at $417,000, with one notable exception.  In Boulder county the maximum loan amount has increased to $460,000 for both FHA and Conventional loan products.  

These increases to the maximum loan amounts are temporary and are set to expire on December 31, 2008.  There have been discussions about making these increases permanent although currently that is not the case.