Lynchburg lenders get the word out on new housing law

By Bryan Gentry

Published: August 27, 2008

A recently passed federal housing bill could provide a big boost to prop up the nation’s housing market, according to several mortgage lenders in Lynchburg.

The Housing and Economic Recovery Act of 2008 became law July 30. It authorizes programs to help homeowners avoid foreclosure, and sets up tax credits to entice new buyers into the market.

Jay Kumar, senior mortgage planner at Mason Dixon Funding in Wyndhurst, said some of the law’s provisions could help first-time homebuyers save big.

The law allows people who buy their first home between April 9, 2008, and July 1, 2009, to receive a tax credit of $7,500 or 10 percent of the home’s price, whichever is lower.

The tax credit is paid back to the Internal Revenue Service, interest free, at $500 a year.

Kumar said that if the $7,500 is used to pay down the mortgage, it could save buyers $30,000 in interest on a 30-year mortgage.

That’s what Kumar wants his clients to do with the tax credit. “My goal is to help them to be debt free,” he said.

Brian Cash, mortgage division manager for Bank of the James, agreed that the tax credit, if used to pay down a mortgage or if put in a savings account, could be effective.

He said he thinks people who have not bought homes before will buy because of the tax credit.

“It should be an economic stimulus,” Cash said.

Both Kumar and Cash have been working with local real estate agents to teach them about the bill’s provisions.

Kumar’s firm is also reaching out to buyers. Billy Woolridge, manager of Mason Dixon Funding’s local office, will hold a homebuyer’s seminar on Saturday at 10 a.m., at Prudential Realty in Wyndhurst.

Bank of the James does not have seminars scheduled for homebuyers, Cash said.

The Housing and Economic Recovery Act of 2008 also sets up foreclosure prevention programs, allowing the Federal Housing Administration to refinance mortgages that homeowners are struggling to pay.

It also raised the maximum limit on FHA loans, Cash said.

Several of the law’s provisions aim to reform the mortgage industry, requiring licensing and training of mortgage officers.

Virginia’s State Corporation Commission has outlined new requirements for mortgage officers, such as training programs and criminal background checks.

Kumar said, “The number one thing we need to do is make sure we don’t have people (in this business) who have committed fraud.”