What is the Housing and Economic Recovery Act (HERA)?
The Housing and Economic Recovery Act (HERA) was created to deal with the 2008 subprime mortgage crisis. The Housing and Economic Recovery Act allowed the Federal Housing Administration (FHA) to guarantee up to $ 300 billion in new 30-year fixed-rate mortgages for subprime loans. borrowers. To participate, lenders were required to write down principal loan balances up to 90% of their current appraised value.
Understanding the Housing and Economic Recovery Law (HERA)
The Housing and Economic Recovery Act was ultimately aimed at renewing public confidence in Fannie Mae and Freddie Mac. It allowed states to refinance subprime loans with mortgage income bonds and created the Federal Housing Finance Agency (FHFA). This new agency used its new authority to put Fannie Mae and Freddie Mac under guardianship in 2008.
Subtitles under the Housing and Economic Recovery Act
HERA has included a number of subtitle acts in the main act, including:
- Housing Assistance Tax Act, 2008
- FHA Modernization Act 2008
- Safe and Fair Application of Mortgage Licenses Act, 2008
Housing Assistance Tax Act, 2008
This closed caption law provided a refundable tax credit for first-time home buyers for purchases on or after April 9, 2008, and before July 1, 2009, equal to 10% of the purchase price of ” a principal residence, up to $ 7,500. It also eliminated the credit for taxpayers with income over $ 75,000 ($ 150,000 for joint returns).
For those who benefit from the tax credit, the reimbursement was planned over 15 years by equal installments through a surcharge on the annual income tax of taxpayers. It also provided emergency aid for the refurbishment of abandoned and seized houses.
FHA Modernization Act 2008
This closed caption law increased the FHA loan limit from 95% to 110% of the median house price, up to 150% of the GSE-compliant loan limit (or $ 625,000). It also demanded a 3.5% deposit for any FHA loan and imposed a 12-month moratorium on the US Department of Housing and Urban Development’s implementation of risk-based premiums.
It also banned vendor-funded down payments while allowing the FHA to insure up to $ 300 billion in fixed rate refinancing loans over 30 years, up to 90% of the amount assessed for distressed borrowers. Mortgage commitments taken on or before January 1, 2008 were covered by law.
In addition, the law required existing mortgage holders to accept the insured loan proceeds as full payment for all pre-existing debts. The participation of lenders in this program was voluntary.
Safe and Fair Application of Mortgage Licenses Act, 2008
This law required all states to establish a mortgage creditors licensing and registration (MLO) system by August 1, 2009 (August 1, 2020, for legislative assemblies that meet every two years. ). States have been allowed to operate their own systems, subject to strict federal standards, or they can participate in the mortgage system and registry nationwide.