by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
We talked about the foregone conclusion of higher loan limits for conforming and HUD loans two weeks ago:
The word inside the Beltway is that the deal has been fast-tracked for approval (by The Senate and President) under the following terms:
1- GSE (conforming) loan limits will be temporarily increased to $650,000 and remain in place until 12/31/2008. That means that states like California, Illinois, New York, Massachusetts, and New Jersey will get some much needed relief.
2- FHA loan limits, currently locked at $362,790, will be recalculated to 125% of the county’s median price, with a limit of $729,000. This is useful for states like California where the conforming loans are subject to LTV decreases due to declining market conditions. FHA loans aren’t subject to those blanket LTV guidelines. This loan limit hike is expected to be permanent, unlike the temporary GSE hike.
Nothing is rock-solid; it’s all rumor at this point. The Senate will play with the numbers but the Beltway Crowd says that President Bush has signaled the loan limits he will support, today. Expect this to be a reality sometime between Valentine’s Day and St. Patrick’s Day.
The Senate played some politics, then promptly passed the bill:
Congress on Thursday passed a $152 billion economic stimulus package designed to provide a timely, targeted and temporary boost to the flagging U.S. economy.
One day after Republicans successfully filibustered a broader plan favored by the Senate Finance Committee, the Senate approved the Republican-backed measure, nearly identical to one passed by the House last week, on an 81-16 vote.
The House approved the measure hours later on a 380-34 vote.
President Bush is expected to sign the legislation quickly.
President Bush telegraphed his likely approval:
“This plan is robust, broad-based, timely, and it will be effective,” Bush said in a statement released by the White House. “This bill will help to stimulate consumer spending and accelerate needed business investment.”
Just in time for Valentine’s Day. Get those loan applications in now; the herd will be stampeding in March.
Ken in Chicago says:
This would be a much needed boost to the loan limits for FHA as this is the only option for many buyers with the current subprime market conditions.
At the very least these are great feel good measures that will make the average person think it might be a good time to buy.
February 8, 2008 — 1:40 pm
sean carr says:
Reminds me of a Reagan Quote:
“The Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
February 8, 2008 — 3:51 pm
Paul Kaplan says:
That would be a welcome valentine’s gift in our market these days!
February 8, 2008 — 5:38 pm
Robert Kerr says:
At the very least these are great feel good measures that will make the average person think it might be a good time to buy.
And at the very worst, these changes burden the taxpayers with more bad paper.
Freddie is going to report its first-even annual loss this month. Fannie will report its first annual loss in 22 years.
With these limit changes, in this economy, 2008 has the potential to be the worst year ever for these two GSEs, and for taxpayers, who will ultimately pay for cleaning up this terrible mess.
February 8, 2008 — 7:29 pm
Brian Brady says:
“and for taxpayers, who will ultimately pay for cleaning up this terrible mess.”
I disagree. These companies are publicly-traded companies with a charter from the gov’t. While they have the implied “unlimited” line of credit to the Treasury, they won’t have to use it. Private companies lose money for a period of time and return to profitablity.
February 8, 2008 — 11:40 pm
jimi says:
FHA entering the Jumbo market … the seeds of the next major housing finance crisis. Fannie and Freddie are reasonably competent and have a decent credit risk management discipline. FHA is incompetent and ill-prepared for underwriting this type of risk.
February 11, 2008 — 6:25 am
Matt Scoggins says:
This is great news! We have some higher-end buyers that have been on the fence for a while now and this will hopefully light a fire under them.
February 13, 2008 — 10:42 am