Update on Stimulus Package - Will it Affect the California Mortgage Market

The fiscal stimulus bill passed the House last week and the Senate's version most likely will be voted on tomorrow.  If the senate passes their version, any differences between the two bills will need to be worked out between the house and the Senate before the bill would be presented to President Bush for signature. At this stage, it is still possible that Congress will send a finalized stimulus package to the White House before it leaves for recess on February 15.  To meet this date, the Senate and House would have to name their committee members immediately after the Senate approves their version to reach a compromise and then agree to send the compromise version back to their respective bodies for final approval.  I believe a more likely scenario will be that the Senate's version will differ significantly enough from the House-passed bill to push presenting this bill to the president for signature to either late February or early March.

What I am happy to report (but can't confirmed) is it appears that all systems are "go" for the House stimulus bill to increase the limit on mortgages purchased by Fannie Mae and Freddie Mac as well as those insured by the Federal Housing Administration (FHA) to as high as $730k in some high priced areas.  Lower priced areas would see an increased FHA limit only. Both increases would be effective only through the end of 2008. 

This is great news for the California Housing and Mortgage Markets in high cost areas like the San Francisco Bay Area and the Las Angeles Area where the increased limits should stimulate both purchases and refinances.  I love this news but it still is a real surprise to me that congress may pass this package with the increase loan limits because:

• The pressure from several oversight and requlatory committees to make sure all regulations are in place to monitor this change. 
• All the behind the scenes talk about putting a two tiered pricing structure for mortgages between $417K and $730K; and
• The secondary market pressure to continue a risk based premium on loans above $417K.  

Look how fast your congress can act when all "eyes" are focused on them to restore confidence in our"credit" market. Or maybe this is because it is an election year!

For reading on Relevant FHA Geographic Area Median Home Price Calculation