Fasten your seatbelts mortgage professionals. This week President Bush will sign into effect his economic stimulus package. The stimulus package contains several features designed to improve the troubled housing market.
It would increase the Federal Housing Administration's loan limits from $362,000 to $729,750 and those of two federally sponsored entities, Fannie Mae and Freddie Mac, from $417,000 to $729,750. The FHA insures private loans made by FHA-approved lenders, while the other two buy and sell loans in the secondary market.
The measure would also enable the FHA to become more active in dealing with the direct impact of the housing crisis, permitting more borrowers facing defaults to refinance subprime loans through the federal agency.
So what does this mean to the mortgage industry?
1) Every loan that was a “Jumbo” loan that was originated in the last 4 years in all probability will be now a conforming conventional loan. That could mean a drop of up to 1.25% in the interest rate for borrowers. On $600,000 that is a savings of $489 a month. You can bet those borrowers will be clamoring for the chance to save money. Especially when the package may call for the change in the loan limits to only last for 12 months.
2) All those borrowers who have conventional loans that are over the current FHA loan limits will get a chance to refinance their first and second mortgages up to 95% of the value of their house depending upon the new FHA loan limit in their geographic area. These are the people that Fannie and Freddie have turned their backs on with the current mortgage crisis. As delinquencies rose credit standards have tightened.
3) Pipelines will swell and people will be hired to handle the increase in volumes.
4) Real Estate will recover in the following years as people have had a chance to re-adjust their budgets and dig out of the mess that was created.
For all those out there that would like to comment on this or who have one of those Jumbo loans, please contact
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