The legislation makes the USDA’s Single-Family Housing Guaranteed Loan Program self-sufficient, the National Association of Realtors reports. Borrowers will have to pay a higher “guarantee fee” of 3.5%–essentially upfront mortgage insurance–but the fee can be folded into the mortgage.

Buyers won’t mind paying a bit more in fees, says Sue Botelho, a senior mortgage advisor with Waterstone Mortgage Corp. in Ft. Walton Beach, Fla. “It’s great news,” she said. “It’s a huge part of my business. I am thrilled.”

Also happy is LGI Homes, a Texas builder that caters to USDA buyers. Chief Executive Eric Lipar estimates he’s lost 100 sales in the last few months.

“Once funding’s officially in place, we’ve got customers waiting,” he said.

The USDA wasn’t immediately available for comment.

As we’ve reported, the program offering no-money-down loans in certain parts of the country for low- and middle-income borrowers, exhausted its $13.1 billion funding earlier this year, leaving some would-be buyers fearful their financing would fall through. USDA loans were particularly popular this year as first-time buyers tapped the government’s federal home buyer tax credit. They have until Sept. 30 to close.

Despite the last-minute save for USDA borrowers, industry watchers haven’t stopped criticizing zero-down deals-given the role they played in the housing crash. The USDA program is considered safer because up to 90% of the purchase amount is guaranteed, meaning the agency will pay should the borrower default.

The USDA has previously said that last fiscal year’s foreclosure rate was 1.72%, well below the Federal Housing Administration’s 3.32%. Borrowers also can’t make more than 115% of a county’s median income, preventing McMansion-sized loans: The average USDA loan is $112,000.

The strong guidelines weed out potentially troublesome borrowers, Ms. Botelho said. “When they approve a loan, it’s a very, very good loan,” she said.

But some might not be as trapped as they think.

Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.

A  real-estate broker in Sarasota, says none of her clients kicked in cash when selling their home last year.  This year, “about half are willing to bring money to closing, anywhere from $5,000 to $45,000,” she says.

Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.

Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive.

The refinancing equation is changing, too. Thanks to rock-bottom interest rates and liberal lending terms for Federal Housing Administration loans, a person who plunks down cash to retire a higher-rate mortgage might be able to reduce his monthly payments, even as he shortens his loan term to 20, 15 or 10 years.

In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return.

 Your home is underwater. You owe more on the mortgage than the property is worth. Maybe hundreds of thousands of dollars more. You cannot afford the mortgage payments, the homeowners’ association dues, the property taxes, and the upkeep. Why not let the Bank take the property? Why shouldn’t you just mail the keys back to the Bank and let the Bank sort it out?

With thousands of mortgage foreclosure lawsuit being filed each month in Florida, it appears that not just a few homeowners and investors are choosing to ignore the problem and head for the hills. Many of these lawsuits are won by default for failure of the homeowner to file a response to the complaint of foreclosure.

Be careful.  Ignoring this particular problem could have consequences you could not possibly have imagined.

For example, pursuant to Rule 1.560(b) of the Florida Rules of Civil Procedure, the lender may request that the Final Judgment of Foreclosure include an order requiring the judgment debtor to complete a Fact Information Sheet (Form 1.977) within 45 days of the entry of the Final Judgment. The Fact Information Sheet is a form of interrogatories in aid of execution that was adopted by the Florida Supreme Court in 2000. The information sought includes the judgment debtor’s income, employment information, bank account information, motor vehicles owned by the judgment debtor, real estate assets, paycheck stubs, income tax returns, and any other such financial statement or loan applications submitted within the last three years.

Most importantly, this Rule specifically states that “Failure to obey the order may be considered contempt of court.” Civil contempt is defined as the failure to do something ordered by the court for the benefit of a party to a civil action. Accordingly, it is within the court’s power to issue an arrest warrant against a judgment debtor who refuses to complete the Fact Information Sheet. It is becoming increasingly common for aggressive lenders to pursue entry of an order of civil contempt against a party who continues to ignore a judgment creditor’s legal right to discovery of the debtor’s financial condition as part of the creditor’s efforts to collect on deficiency judgments. In other words, the legal system does not let you simply ignore or walk away from the problem.

While your situation may seem hopeless, relief may be had by attacking the problem head-on. Keep open communication with your lender and explore loan modification options. If that doesn’t work, hire a Realtor that specializes in short-sales immediately, to assist you in the sale of the property.  And if you decide to pursue a short sale, with some persistence, your lender may even agree to waive their right to pursue the loan deficiency balance remaining after the sale of the property or negotiate a lesser amount.

If you have been served with a foreclosure lawsuit, hire an attorney. Your attorney can assist you in defending the foreclosure, buy you additional time to obtain a short-sale, and also assist with your negotiations with the lenders. Making this effort to mitigate your damages can result in a reasonable settlement and may help you escape liability for a large amount of debt.

Some of the largest mortgage servicers and lenders in the country are gearing up campaigns to reach out to carefully targeted borrowers with cash incentives that sometimes range into five figures, plus a simple message: Let’s bypass all the time-consuming hassles of short sales and foreclosures. Just deed us the title to your underwater home and we’ll call it a deal. We won’t come after you to collect any deficiency between what you owe us on the mortgage and what we obtain from the home sale. We might even be able to wrap up the whole transaction in as little as 30 to 45 days.

Most analysts expected housing might hit a rough patch after the home-buyer tax credit expired in April.  But is the plunge in demand becoming worse than expected?

It’s a fair question, given Wednesday’s report that new home sales plunged 33%  in May from April and were off 18% from one year ago.

Moreover, the Mortgage Bankers Association reported that mortgage rates fell again, down to 4.75% last week from 4.82% two weeks ago. By comparison, rates were slightly higher one year ago, at around 5.3%.

Yet demand for refinancing or for taking out new loans is tepid. The index that tracks new purchase-loan activity was down 2.3% from last week and nearly 37% from one year ago.

That weakness is also showing up in home sales contracts signed in May, which the National Association of Realtors estimates is down 10% to 15% from one year earlier.  Those deals won’t close until later this summer, which means that we could be in for several more months of gloomy housing indicators.

One big question is how quickly demand will bounce back as the market works through the post-tax credit hangover.  Another big question: How quickly will new supply come onto the market in those intervening months? If more banks put homes on the market this summer and more sellers list their homes, that pushes up inventories and pushes down prices.

Housing economists are gloomier about the prospects than just a month ago, which suggests that there may be more evidence that the tax-credit lull won’t be as temporary as once believed.

The answers to those questions could foretell whether housing prices drop just 5%, or if there’s truly a “double-dip” in store, that would mean drops of around 10-15%.

Home buyers may get an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.

“We honor those who serve our country and are glad that this bill acknowledges the unique circumstances they face,” said Benjamin Clark, 2010 President of NAEBA.  ”This bill ensures that members of the military have equal opportunity to participate in the homebuyer tax credit and offers relief to struggling military families by making the mortgage payment tax deductible.”

The Worker, Homeownership, and Business Assistance Act of 2009 provides a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence and a tax credit of up to $6,500 for repeat home buyers who have owned a home for five consecutive years out of the prior eight years. The tax credit is available for eligible purchasers who have a binding sales contract in place by April 30, 2010, and close by June 30, 2010.  However, realizing that members of the military, the Foreign Service and Intelligence Community have unique circumstances the bill has special provisions for this group:

– Tax credit extended for one year for military personnel serving outside the United States for at least 90 days during the period beginning December 31, 2008 and ending May 1, 2010.
– Eliminates the 36-month recapture requirement for military personnel, including members of the Foreign Service and intelligence community, forced to sell or move from a tax credit home as a result of an official extended duty of service.

Visit www.irs.gov for more information on qualifying and claiming the tax credit.

Thomas insisted that his lender, American Home Mortgage Servicing, agree not to come after him for the estimated $174,000 he still owed on his two mortgages.

The real-estate lobby wants Congress to extend the amount of time that potential home buyers have to complete transactions that qualify for the $8,000 federal home-buyer tax credit.

To qualify for the tax credit, buyers had to sign purchase agreements by April 30.  Those buyers have until the end of June to close on those sales, and anything that closes after that wouldn’t get the tax credit.

The problem, says the National Association of Realtors, is that many of those signed contracts are on foreclosures and short sales, where the lender allows the house to sell for less than the amount owed to the bank. Those transactions take longer than normal to process, and there’s some concern that many sales may not actually close in time.

“There could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems,” said Lawrence Yun, the trade group’s chief economist, in Wednesday’s report that showed a 6% surge in pending home sales during April.

The NAR and its members are asking Congress for flexibility with the June 30 deadline, but it is unclear when—or even if—something would happen. (The National Association of Home Builders says it is not asking for a deadline tweak.) Congress would have to pass such a measure quickly, which is no easy task. One possibility would be to attach the extension to a piece of legislation that’s already winding its way through both chambers.

Last week, Congress went into the Memorial Day recess without completing a bill to authorize new funding for the USDA’s rural development loan program, which lets some home buyers tap 100% financing. Supporters of that program have been pushing for more funds for several weeks.

Without a last-minute reprieve, all would-be buyers can do is push for the different parties to close the deal in time.

But don’t spend that downtime shopping. Incurring additional debt can raise red flags with the lender, possibly derailing a deal at the last minute.

“We do see it happen where [buyers] qualify and then they go out and buy a new car,” says Brent Anderson, vice president of investor relations with Meritage Homes. “All of a sudden they don’t qualify anymore.”

The financial turmoil in Europe is providing an unexpected windfall for American home buyers, as international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels of the year and back near 50-year lows.

Instead, many in the industry now say rates could drift as low as 4.5% this summer from 4.86% now, instead of rising to 6% as some economists projected, making for significantly lower payments for Americans buying homes or refinancing their mortgages.

Refinance business “exploded” last week, says Jeff Lazerson, chief executive of Mortgage Grader, a brokerage in Laguna Niguel, Calif. “It’s schizophrenic. We all had this expectation of higher interest rates and no more refinances.” He says he helped a borrower lock in a 30-year loan with a 4.25% fixed rate last week, the lowest in his 24 years in the business.

Economists largely attribute the decline in mortgage rates to the European debt crisis and new concerns about the global economy, which unleashed a massive wave of cash into U.S. bonds from investors around the world.

This buying pushed down yields on Treasury bonds. Because mortgage rates are closely pegged to yields on 10-year Treasury notes, which fell to 3.2% Friday, the decline in Treasurys pulled down mortgage yields. Typically, mortgage yields remain around 1.5 percentage points above yields on 10-year Treasury notes.

Falling mortgage rates can give a powerful lift to the housing market. A general rule of thumb holds that every one percentage point decline in mortgage rates is the equivalent of roughly a 10% reduction in the home price for the buyer. So, if the current rates hold, say economists, that could help stabilize prices and allow current homeowners to sell existing homes without substantial price cuts.