Update On The Economic Stimulus Package

The Economic Stimulus Package was signed into law on Feb. 13. In addition to several other benefits for consumers, it provides temporary loan limit increases for some high-cost areas for Fannie Mae and Freddie Mac loans and potentially all areas for FHA loans.

New Loan Limits

HUD has yet to determine the higher loan limits. The new loan limits will be based on the median area sales prices. But, we do not know what timeframe will be considered - it could be published prices from the third quarter of 2007, fourth quarter of 2007, or the entire 2007 sales year. HUD has 30 days from the day the President signed the package into law to identify the impacted MSAs - meaning sometime in mid-March. The timeframe used by HUD to determine the higher loan limits is key to these new limits. Expect the impacted areas to be announced in mid-March and remain in effect until Dec. 31.

Fannie Mae and Freddie Mac guidelines will probably will fall between our current conforming and nonconforming guidelines. Expect guidelines tighter than conventional and more loose than Jumbo. Also we may have to manually underwrite - and not be able to use Automated findings. FHA should be about the same.

Pricing for the new loan amounts is yet to be determined by Fannie Mae, Freddie Mac and secondary markets. However, we believe loans with higher limits will cost more.So expect higher rates than conforming, but lower than Jumbo. Wall Street has indicated these transactions will trade like nonconforming loans. We also anticipate a higher cost for expanded FHA loan limits.

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