Stimulus Packate Status with Respect to FHA and New Conforming Limits

We are still waiting for the Senate and House Banking leadership to resolve the contested items:

• FHA Mortgage Limit Increase:
• New Conforming Limit Increase:

FHA Mortgage Limit Increase:

The current thought is the FHA mortgage limit increase will not be permanent.  The House version of the FHA bill is currently not attached to the stimulus package. The next step is for the stimulus bill to go back to the Senate for consideration and to work out a compremise while there is still tremendous pressure to move quickly due to Market conditions.  There is also some opposition.   Several Senators have already floated proposals that could delay passage of the bill. For example, some senators may want to lower the maximum FHA loan amount to $625,000 which will lead to debates and delays. But, the implementation of the new calculation formula (changing the maximum FHA amount from 95% to 125% of an area's median sales price) should occur quickly.

New Conforming Limit Increase:

Will the new mortgages, with the new conform loan amounts, be put into normal FNMA & FHLMC securities (TBA's)? Currently, the majority of participants expect that these agency-eligible jumbos will not be TBA eligible, which could lead to rate and pricing issues. Additionally, market participants have questioned whether the agencies will charge a special guarantee fee for jumbos or whether they will maintain the fee that was added for conforming loans a few months ago. There are initial start-up costs for the GSEs (Government Sponsored Enterprises, FNMA & FHLMC) in order to enable their systems to process these new loans. Given the temporary nature of the plan, these upfront costs may make it more expensive for the GSEs to process these loans, and this would be passed on to borrowers. Given that the majority of outstanding jumbo loans are owned by banks, many have suggested making these loans agency eligible (allow FNMA & FHLMC to buy them) would free up balance sheet and much needed capital for these banks, a nice benefit! Analysts estimate that of the $2.7 trillion jumbo mortgages outstanding, roughly $200 billion of existing jumbo MBS and another $200 to $300 billion of whole jumbo loans currently held on bank balance sheets would be eligible for refinancing through the agency loan programs. These estimates, however, depend heavily upon how much the conforming loan limit is raised.

Read Also:
Will 0ver-$417,000 Mortgage Rates be Lower?
Proposed Economic Stimulus Package Proposals Affecting Real Estate Market
Relevant FHA Geographic Area Median Home Price Calculation