'Final' Economic Stimulus Package Includes $729,500 Conforming Loan Limits

From an email I received this evening from the California Association of Realtors...

Congress agreed to an economic stimulus package today and sent the bill to President Bush for approval.

The Senate's version of the bill expands rebate checks for seniors and disabled veterans and includes the same increases in conforming loan limits found in the House stimulus package. The House also passed the Senate's version of the bill, and it will now be sent to the White House. The President is expected to sign the legislation by the end of next week, ahead of the Congressional self-appointed deadline of February 15th. The increase in conforming loan limits is currently slated to last through 2008, although many groups (read: Realtors) are lobbying to make them 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 (such as San Francisco). By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation could 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.

SFGate has an article from the Associated Press this afternoon about this as well...

California Association of Realtors [official site]
Congress Sends Economic Aid Plan to Bush [SFGate]