What The Economic Stimulus Package Means to you and why Buyers should act now.

President Bush Wednesday signed off on the $168 billion stimulus packaged approved by Congress last week, which, in addition to tax rebates for millions of working Americans and business owners, includes a vital, but temporary increase in the conforming loan limit.  The economic stimulus package will allow the Federal Housing Administration, as well as Fannie Mae and Freddie Mac, to offer mortgages above the current conforming loan limit of $417,000 to as much as $729,750 in high-cost areas using a formula that considers an area's median home price. The increase would only apply to loans originated between July 1, 2007 and Dec. 31, 2008. A host of details remain to be worked out, including how the median home price is established.From everything we've read, the significance of the bill and what this means to you the consumer is:

• It could be several months before the impact is felt in the mortgage markets. Wall Street is still working out whether investors will want to bundle securitized loans above $417,000 with loans below that level, or if they will invest in them separately.
• Rates for such loans might be higher because banks fear larger loans are riskier, but they'd still likely be lower than current jumbo rates.
• Even though the proposal does not apply to loans made before July 1, borrowers with older mortgages could refinance into new loans that would be sold to Fannie and Freddie, because those loans would be considered new loans.
• The newly passed economic stimulus package could aid sales of more expensive homes previously encumbered by the higher interest rates of non-conforming jumbo loans.
• Repeated Federal Reserve interest rate cuts continue to put downward pressure on mortgage rates, which are at about 5.6 percent.
• Lower interest rates might boost sales and prevent foreclosures by allowing more homeowners to refinance.
• Declining home sales have contributed to lower prices, making homes more affordable.

My thoughts:  Who will benefit?  Home buyers who are in the market as well as home sellers, who should benefit from a larger pool of buyers, who would then be able to get bigger loans at lower interest rates.  Some homeowners who have jumbo loans might be able to refinance into a new conforming loan.  The amount of the new conforming loan limit in each county can only be 125% of the median price.  This is obviously important to our area because we have a very high median price compared to the rest of the country.