By Denise Lones M.I.R.M., CSP  

                        
On December 14, 2007, the U.S. Senate passed a new law—the FHA Modernization Act of 2007.  This legislation was in response to the sub-prime mortgage crisis of 2007, the year’s top real estate story.    
This will help borrowers in a couple of ways.  They will have an alternative to risky mortgages.  It will help protect the interests of current homeowners and future homeowners by giving borrowers a safer way of borrowing money when purchasing a home. 

    
The FHA Modernization Act of 2007 contains several key features:  

      
First, it will help homeowners who are currently in the unfortunate situation of not being able to afford their mortgage payments as a direct result of being involved with ARM’s—Adjustable Rate Mortgages, specifically sub-prime loans.      
Second, the FHA will increase mortgage loan limits to help first-time home buyers, minority buyers, and others who do not qualify for conventional mortgages.   
Increasing the loan limits will also help people in high-cost areas because the current FHA limits are exceeded by house prices in most of these areas.         
Third, the FHA will make mortgage insurance more widely available to individuals regardless of race, ethnicity, or social status during periods of prosperity or economic depression.   
Fourth, the FHA will make it possible for higher risk (but creditworthy) borrowers to obtain prime financing.   
The impetus of this new legislation is to help people get into mortgages they can truly afford—while avoiding handing out mortgages to people who can’t.  While this sounds like plain old common sense, it was the violation of this principle that created the sub-prime crisis in the first place.   
The FHA will also work directly with borrowers in default to help them restructure their loans.  This will help prevent foreclosures.   
So what does all this mean for you as a real estate agent?      
You need to know and understand that your buyers, more than ever before, can take advantage of the new programs that will become available as a result of this legislation.     
Currently, this bill has to be sent to the President to be signed into law.  This is expected to happen quickly.  This is exactly what I’ve been saying the past year on several occasions: “The government will not allow our real estate economy to crash”.   
I believe the real estate industry is the leader of our economy.  Without homeownership, what do you have?  Without homeownership, you don’t have the home improvement industry.  The government recognizes this.       
The sub-prime crisis hit full power in August 2007.  By December 14, the United States Government has put together a plan to make sure this never happens again.  I’m impressed.  That’s very fast.  This is one of the biggest events to happen in real estate in the last decade.     
Pay attention to this.  Understand it.  Get on the FHA website.  Learn what you need to learn.  Watch carefully for the moment it’s signed into law—because this will change things for the better in real estate.