Question

What are the short-run and long-term perspectives of the Housing and Economic Recovery Act of 2008?

Answer 1

The rationale of the HERA is to reinforce and bring up to date regulation of Fannie Mae and Freddie Mac and the Federal Home Loan Banks. The major part of the Act creates a new plan at the Federal Housing Administration which will facilitate at least 400,000 families, thwart foreclosure by providing for fresh loans following lenders take deep discounts. A supervisory body for Fannie Mae, Federal Home Loan Banks, and Freddie Mac, the housing government-sponsored enterprises was created in the “Federal Housing Finance Regulatory Reform Act of 2008.” Broad authority has been granted this regulator, with the power to: set up capital standards; set up prudential management standards, together with internal controls, audits, risk management, and management of the portfolio. The regulation includes enforcing its commands through cease and desisting right, civil money penalties, and the power to eliminate officers and directors; put a ceiling on asset growth and capital distributions for undercapitalized institutions; place a synchronized entity into receivership; and appraise and endorse fresh product offerings. By means of raising the loan limits in high cost areas, the Act also affords more families the chance to be eligible for Fannie Mae and Freddie Mac loans. The Act also increases the reasonable housing component of the GSEs by requiring the enterprises to support underserved markets. Last but not least, the Act creates funds which are financed by assistance for the enterprises so as to build inexpensive housing. The meticulous implication to this bill is Federal Housing Administration programs “HOPE for Homeowners Act of 2008” that will help out roughly 400,000 homeowners to avoid foreclosure. The segment of the HERA may well in fact aid a number of families at risk of foreclosure. An supplementary Act contained by the HERA, is the “Foreclosure Prevention Act of 2008”, which is intended to supplement assistance to the families and communities in light of the foreclosure crisis. A provision is incorporated to help returning soldiers evade foreclosure. There is an essential subdivision within the HERA which alters the tax treatment of several homeowners. This tax pack up aims to lend a hand to homeowners and prospective buyers so as to acquire reasonable loans. One of the most noteworthy part of this tax package is the refundable first-time home buyer credit. Additional tax provisions integrated in the Act include: additional standard deductions for real property taxes, increased mortgage revenue bonds, REIT reforms, merchant payment card information reporting, reduced home sale exclusion, an enhanced low-income housing tax credit, delayed worldwide interest allocation, and an acceleration of large-corporation estimated tax. Under HERA, there are valuable profit to a first-time homebuyer as the first-time homebuyer is permitted a refundable tax credit equal to the lesser of $7,500 or 10 percent of the purchase price of a principal residence.