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This morning President Bush signed the "Housing and Economic Recovery Act of 2008."

The legislation will assist an estimated 400,000 homeowners facing foreclosure, many of whom reside in California, by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas.

The bill permanently increases the conforming loan limit to $625,500. C.A.R. has long advocated for higher conforming loan limits. In February, the Economic Stimulus Act of 2008 was signed, temporarily raising the conforming loan limit in high-cost areas to $729,750 from $417,000 until December 31, 2008.

The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area’s median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area’s median home price, up to $625,500. Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008.

Other provisions:

• A temporary increase in mortgage revenue bonds to refinance subprime mortgages.
• New regulator for Government Sponsored Enterprises to restore investor confidence in GSE loans and help the market and economy stabilize.
• First-time home buyer tax credit, which allows first-time home buyers to receive a tax refund worth up to 10 percent of a home’s purchase price, up to a maximum of $7,500. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.
• Temporary raise in the loan limit for the Veterans Affairs home loan guarantee program to the same level as the economic stimulus limits until the end of 2008.
• Adjustment to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), allowing sellers to provide the non-foreign affidavit to a qualified closing entity and not just the buyer.
• The setting of minimum requirements for mortgage originators, which mandates fingerprinting of loan originators and establishes a nationwide loan originator licensing and registration system. The requirements do not apply to those only performing real estate brokerage activities unless they are compensated by a lender, mortgage broker, or other loan originator. States will have the ability to implement more stringent laws.
• The creation of a National Affordable Housing Trust Fund to help cover the cost of the FHA rescue plan for the first five years and develop affordable housing in subsequent years.
• The Treasury Department’s proposal to create a federal backstop program to insure the financial well-being of Fannie Mae and Freddie Mac.
• The FHA’s inability to insure loans that utilize a seller-funded down-payment assistance program. Down-payment assistance from family, employers and other nonprofits is still allowed.
• The Community Development Block Grant Programs’ $4 billion allotment for communities to purchase and refurbish foreclosed homes.

FHA loans have not been a viable source of funding to homebuyers upper-end markets such as those in California for the last 10 years because of their low dollar limits. That has changed. With the recent passing of the Economic Stimulus Act of 2008 by Congress limits were raised from $362,790 to $729,750.

FHA loans are government insured and offer buyers competitive rates. They feature more flexible credit guidelines than that of conventional loans and allow up to 100 percent financing with down payment assistance. And the down payments can be as low as three percent of the purchase price.

VA loans are federally guaranteed. VA loans were established in 1944 to assist eligible veterans with purchasing a home. Unfortunately, there are many veterans who are not taking advantage of this great benefit, because they don’t believe they are qualified.

U.S. veterans who have served on active duty and have an honorable discharge after serving a minimum of 90 days of wartime or a minimum of 181 continuous days during peacetime; National Guard and Selected Reserves; and spouses of service men or women who died in service or of a service related injury can qualify. Before applying for a loan, veterans will need to acquire a Certificate of Eligibility from the Veterans Administration. Just as with FHA loans, a VA loan allows home purchases with no down payment up to $417,000; with a down payment veterans can be approved for higher loan amounts.

There are some restrictions with VA loans, such as the loan has to be used for a primary residence – single family dwelling, planned unit development, condominiums or two to four unit dwellings. VA loans can be used a second time, but must meet the same requirements and used only for a primary residence.

A huge benefit of the VA loan is the savings in mortgage insurance. With a VA loan, there is only a one time funding fee and no monthly premiums, which can add up to huge savings over the life of the mortgage loan.

Harvey Realty, Inc's preferred lenders can assist buyers in obtaining both FHA and VA loans. For more information please call 1-888-775-3846.

The Federal Reserve will release its Beige Book report tomorrow afternoon. -named after the color of its cover, but it is considered to be important because it details economic activity and conditions by region throughout the U.S.

Based upon Fed Chairman Ben Bernanke's testimony last week, we will not likely see any significant surprises in this report, and therefore, mortgage rates should have little movement tomorrow afternoon.