January 26, 2008

Good News For Borrowers

It is being discussed that when The President makes his State of The Union address next week, he will ask Congress to vote on increasing the maximum level on conforming loans. The current level is right now, $417,000. According to this news story I am supplying, it might be raised to $625,000. This will mean that a borrower will be able to borrow money for a home loan at a $625,000 amount or lower, and pay the current favorable rates we now are seeing on fixed rates. In my opinion, this is huge. This could change the housing industry here in California by making home loans more affordable to borrowers and significantly reduce the foreclosure rate. Here is the news story for you to read:

WASHINGTON, D.C. - The National Association of Realtors® urged President George W. Bush and Congress to help homeowners and the national economy by loosening constraints on Fannie Mae and Freddie Mac as an integral part of a federal stimulus package.
“We believe that any stimulus package must address housing issues and increasing the conforming loan limits for these two government-sponsored enterprises,” said NAR President Dick Gaylor, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. “The increase in loan limits would not only improve liquidity in the mortgage marketplace, but also boost homebuyers’ confidence levels, resulting in increased sales and economic activity.”
NAR has been calling on Congress and the administration to increase the loan limits for Fannie Mae and Freddie Mac from the current ceiling of $417,000 to $625,000. “This change will permit more families to enter the housing market by making more mortgages available with lower interest rates. Increased home sales will lower inventories and immediately start stabilizing the housing market and the economy,” Gaylord said.
In addition, NAR has been actively advocating for quick passage of the Federal Housing Administration Reform bill. A reformed, modernized FHA program would offer a safe and affordable alternative to subprime mortgages, which are widely blamed for the current high rate of foreclosures and credit crunch. “FHA reform would not only ensure we don’t find ourselves in this very unfortunate situation again, but also it can help many families currently facing foreclosure,” said Gaylord.
In a letter to congressional leaders, NAR estimated that lifting the GSE loan limit to $625,000 would lower interest payments for consumers who get new “GSE jumbo” loans, reduce the supply of homes on the market by one to one-and-one-half months, strengthen home prices by two to three percentage points, and increase economic activity by $42 billion. An additional NAR report shows that increasing conforming loan limits could help reduce foreclosures by 140,000 to 210,000 and result in an additional 348,000 home sales.
“This is the quickest way to help the hurting housing market,” said Gaylord. “As the potential for an economic recession increases and the fragile housing market continues to teeter, raising loan limits and reforming FHA would immediately impact the marketplace without the need for any new, complex federal programs or tax dollars. We strongly urge Congress to take these actions, in any stimulus plan, to stabilize the housing market and protect homeowners.”