By now, we have all heard the good news of increased lending limits in high cost areas, and tax rebates to help stimulate the economy. On the surface, we all rejoice now that more loans and with less restriction will become available, right?

This is what's happening: The US House of Representatives overwhelmingly passed HR 5140 recently - an economic stimulus package that includes a temporary increase in the conforming loan limit and the upper threshold for FHA loan programs to as much as $729,750 in high-cost areas. 

The temporary increase would last only until the end of 2008.  This bill would also restrict Fannie Mae, Freddie Mac and the Federal Housing Administration from guaranteeing or purchasing loans above 125 percent of the median home price for a given area. 

Plain English please...

That means that the existing $417,000 conforming loan limit for mortgages eligible for purchase by Fannie and Freddie would not increase in areas where the median home price is $333,600 or less.  You might say, Hmmm!  where are the reports? The answer is simple, as of right now we don't have access to that information because this data has never been published by HUD!

Therefore, it would be up to the Secretary of Housing and Urban Development to determine the median home price for different housing markets "as soon as practicable," but no later than 30 days after passage of the bill, relying on existing commercial data where needed. 

In other words, if median home prices in your marketplace are $336,000 or less, this bill won't really affect you; and there's no way to tell if median home prices in your area are higher than $336,000 until HUD publishes this data.  Nevertheless, jumbo relief is certainly on the way for places like California where median home prices are certain to be above $336,000.

Currently, the loan limit for FHA loan programs is between $200,160 and $362,790, depending on the county where the property is located (click on the graph for information about your area)

The proposed higher limits for FHA loan guarantees are also set to expire at the end of this year, unless Congress passes other legislation intended to modernize FHA programs by introducing risk-based pricing and lowering down-payment requirements.

In order to make higher limits a reality, the next step is for the Senate to pass the bill and for the President to sign it into law.  The target date for final passage set by the White House and Congressional leaders is February 15. Stay tune for more ...