Increased Federal Loan Limits Lower Price Tag on Hundreds of Thousands of Loans

This may be old news - but in case you didn't know!

One immediate benefit of The Economic Stimulus Act of 2008 is the increase in loan limits for high-cost areas of the country. By raising the Federal Housing Administration’s loan limits on what qualifies for lower-cost FHA, Fannie Mae and Freddie Mac loans, the bill could help a quarter of a million families purchase or refinance their homes at a lower cost. Combined with record low interest rates, the change could improve the financial picture for many now facing foreclosure. The options and loan ceilings vary, however, from county to county and only a Certified Mortgage Planner can weigh all the options to determine if a new loan makes sense for an individual homeowner.

The increase is only temporary, however, so homeowners looking to shed the premium they pay for subprime or jumbo loans required to live in their state need to act quickly to take advantage of these federally-guaranteed loans.

FHA loan limits that will range from $271,050 to $729,750 with the largest loans available in high-cost metropolitan areas such as New York, Los Angeles, San Francisco and Washington, D.C. But even smaller markets could see increased activity in the housing market when the new loans become available.

Inside H.R. 5140 - Increase in Loan Limits

The H.R. 5140 Economic Stimulus Act of 2008 has a little more to it than just that rebate check everyone is waiting on! Let's look at how HR 5140 addresses GSE and FHA loan limits.

TITLE II--HOUSING GSE AND FHA LOAN LIMITS

SEC. 201. TEMPORARY CONFORMING LOAN LIMIT INCREASE FOR FANNIE MAE AND FREDDIE MAC.

Raises the statutory ceiling on the maximum original principal obligation of a mortgage originated between July 1, 2007, and December 31, 2008, that may be purchased by either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Disregards mortgages purchased with the increased ceiling amount for purposes of meeting certain housing goals established under the Housing and Community Development Act of 1992.

Expresses the sense of Congress that Fannie Mae and Freddie Mac should securitize mortgages acquired pursuant to the increased conforming loan limits of this Act if the manner of securitization does not: (1) impose additional costs for mortgages originated, purchased, or securitized under existing limits; or (2) interfere with the goal of adding liquidity to the market.

SEC. 202. TEMPORARY LOAN LIMIT INCREASE FOR FHA.

Establishes a temporary loan limit increase for FHA-insured mortgages in specified high-cost areas for which a borrower received credit approval by December 31, 2008.

Grants the Secretary of Housing and Urban Development (HUD) discretionary authority to increase loan limits in 2008 based upon the size and location of residences in particular areas.

Directs the Secretary to publish the median house prices and mortgage principal obligation limits as revised by this Act not later than 30 days after its enactment.