Sweeping housing legislation was recently passed. The legislation is designed to offer assistance to troubled homeowners at risk of foreclosure and provide government assistance to bolster Fannie and Freddie with a temporary rescue plan.
A few of the key provisions that will most directly impact the consumer include…
- A permanent increase of conforming loan limits to $625,500 from the current $417,000 in high-cost areas.
- A first time home buyer credit of 10% of purchase price but not to exceed $7,500. Important to recognize that this is really an interest free loan to be paid back over 15 years.
- A grant to states to purchase and restore foreclosed properties.
And one other provision that may interest you…
Buried deep within the legislation (page 690) is a change in the capital gains tax exemption rule. Prior to the new legislation, if a homeowner lived in the home as their primary residence for 2 of the past 5 years they could claim an exemption on capital gains of up to $250,000 if filing singly or $500,000 if filing jointly. Under the new legislation, the exemption is based on a ratio of occupancy as primary residance over the total ownership of the property. The Mortgage Reports discusses the calculation and the impact on home sellers.
