Real Estate Laws affect how you are buying a house



California home buyers and investment property owners are affected by the recent changes in real estate laws due in part to the mortgage meltdown seen recently. Buying a house will become more problematic for first time buyers as the door closes on lower down payments and handing out subprime loans to individuals and companies. In order to find out why these new real estate laws are being put in place you only need to look at the bank economic situation. The new laws will affect potential owners in how to buy a house from the financing angle for years to come.



Amid the crisis of the sub-prime mortgage meltdown, and resulting recession that may be spreading, congress appears to be in near political grid-lock concerning the needed relief for the housing sector.

One plan, authored by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, requires both mortgage lenders and holders to voluntarily accept wide losses upfront (about $0.15 cents to the dollar), with the federal guarantee that the reduced loans would be repaid. This would require the government to re-finance hundreds of billions of dollars worth of troubled mortgages nationwide.



The Bush administration and republicans have also acknowledged the need for governmental assistance for this crisis, and have countered with a plan to expand the Federal Housing Administration (FHA), immediately addressing about 250,000 troubled homeowners, or approximately the same number that face foreclosure in a single month. In addition to this plan they have supported the "Hope Now Alliance", a coalition of lending industry leaders that have claimed to have helped over a million troubled homeowners by postponing payments to future collection dates.



Critics of the Barney plan call it a government bail out for all mortgage industry participants, and that it may encourage the mortgage industry to avoid write downs by accepting government aid to appease shareholders. Conversely, critics of the FHA proposed expansion have said that it may be too little to late to help the growing number of foreclosures that are currently pelting the housing industry with losses.



Even after the needed Federal Reserve interest rate cuts were instituted, pressures on Washington to act quickly to solve the root causes of the problem in the mean time have been mounting. The housing problem has spread beyond subprime to include people in "underwater" mortgages due to plummeting house prices, which could represent 1 in 5 or 12 million borrowers by next year. The proposed congressional plans may drive down the foreclosure rate, but may make borrowers feel as if their entitled to coverage of their losses, increasing the delinquency rate. Although the situation has been acknowledged as delicate at best, it will be paramount for the mortgage industry to show a willingness to participate in the proposed congressional solutions. Rep. Frank has warned lenders that the government may pass legislation later this year that may have far less rights in store for lenders if they don't increase their levels of cooperation.

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