Released today by the California Association of Realtors

“Thanks in part to the lobbying by C.A.R. and NAR members; the Senate passed their version of an economic stimulus package on Thursday, February 07, 2008.  The Senate version expands rebate checks for seniors and disabled veterans and includes the same increases to the conforming loan limits for both GSE and FHA found in the House stimulus package. 

The House has already announced that they plan to vote on the Senate version of the stimulus package and expect to quickly pass the stimulus package with a bipartisan vote.  The President is expected to sign the legislation early next week, ahead of the Congressional self-appointed deadline of February 15th.   

The increase in the conforming loan limits will last through 2008, but C.A.R. and NAR continue to lobby for FHA and GSE reform,  making these increases permanent. 

The U.S. House of Representatives passed a stimulus package last week that raised the FHA and conforming loan limits to as high as $729,750 in high-cost areas.  By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales. 

Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably. Increasing the FHA loan limits is critical to bolstering California’s housing market. 

Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high cost states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. 

The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices.   Additionally, raising Fannie Mae and Freddie Mac’s (GSEs) conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on current housing markets.  For instance, increasing the GSE loan limit could result in more than 300,000 additional home sales and strengthen current home prices by 2-3%. The critical role that GSEs play in providing liquidity to the mortgage market has never been more evident than it is today. 

The national subprime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets.  Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.”

The degree of the impact of the stimulus package, of course, remains to be seen; however, there’s no doubt it will have some amount of positive change to California.  Once the package is signed by the President, it will have to be reviewed and implemented by Fannie Mae and Freddie Mac.  Their requirements will then have to be disseminated to the mortgage industry.  The next issue we’ll be juggling is the delay that will be caused by the influx of refinance applications and purchase contracts into the system.  Because so many in the mortgage industry have been layed off or left for greener grass, the staff will surely have difficulty handling the expected rush. 

I expect that we will, once again, be altering the way in which we write contracts for buyers purchasing homes.  An Indy Mac representative in my office yesterday indicated that he believes the delay in funding new loans will be 60-plus days.  In other words, Realtors and their clients must be cognizent that contingency periods and close dates must be adjusted accordingly.   

Vicki Moore About Vicki Moore

RE/MAX Star Properties
282 Redwood Shores Parkway
Redwood Shores, CA 94065

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