Congress Acts to Promote Homeownership - Economic Stimulus Package Passes Congress
The Senate & House last night passed the stimulus package that includes higher mortgage limits for both FHA and the GSEs. The original stimulus proposals only involved tax issues. Because of the importance of this legislation, the bill could be signed by the President as early as today.
Below are the key provisions of the bill with respect to the mortgages.
First, it is a temporary increase that expires on December 31, 2008. We will discuss the FHA and GSE changes separately below.
FHA
The mortgage limit provisions include four temporary changes for the FHA program. (As a reminder, the FHA modernization bill includes higher mortgage limits. It is possible that legislation could make this provision permanent or limit the FHA maximum limit to $417,000 as the Senate bill does.)
* Raises the base loan limit ("floor") to 65% of the current GSE limit ($417,000) = $271,050
This provision is effective the day the President signs the bill.
* Raises the maximum FHA loan limit from $362,750 to $729,750 (175% of the GSE base limit - $417,000)
* Secretary has the discretion to raise the maximum loan limit by $100,000 in an area at the $729,750 limit for any size residence (including 2-4 family units).
Only "high cost areas in California and Hawaii (Honolulu) are likely to increase to the $729,750 maximum. Washington D.C., for example, will increase to about $600,000 based on our analysis of available data.
* Increases the calculation factor from 95% to 125% of area median sales price for determining "high cost" areas. We have an updated list of affected areas.
* Implements Fannie Mae/Freddie Mac ratios for calculating maximum loan amounts for two-, three- and four-family units in all of the above categories.
Fannie Mae and Freddie Mac two-,three- and four family unit properties increase the same percentage that the single family limit increases. In 2006. the GSE single family limit increased 15.95% and the mortgage limits
for multiple units increased 15.95%.
This change should result in a significant increase in FHA limits for multi-unit properties. In the past, FHA used fixed percentages of the single family limit (i.e. 107% of single family for two family unit, 130% for three-family unit and 150% for four-family units). For example, under the new provision, if the single family limit increases slightly over 100% in a "high cost area" (from $362,790 to $729,750), we would assume the multiple unit amounts would increase the same percentage (slightly over 100%).
Fannie Mae & Freddie Mac
The bill raises the GSE maximum loan limit to $729,750. The bill states that the GSE limits should follow the HUD mortgage limit calculation process and therefore the GSEs and FHA will have the same limits in areas that
exceed $417,000. Fannie Mae and Freddie Mac's current limit will, in effect, become their "floor" ($417,000). There are a number of markets that will benefit dramatically from this change to the GSE mortgage limits, though not as many as NAR advocated. NAR will continue to advocate for broader expansion of the loan limits.
THIS DOES NOT MEAN EVERYONE GETS $729,750! Many area of the country will only see SMALL increases!
Give it a couple of weeks, then consult your LOCAL mortgage professional for your areas new (temporary) loan limit!
