Stimulus Plan May Be a Boon to Higher-Priced Housing

A component of the government's tentative economic stimulus package announced Thursday would give an immediate lift to buyers and sellers in higher-priced housing markets.

source: wikipedia.com

The package agreed upon by Democratic and Republican members of the House would allow government-sponsored Fannie Mae and Freddie Mac to buy mortgages at least 50 percent more expensive than the current $417,000 limit. The Senate and White House still must sign off on the proposed stimulus plan, which also includes tax rebates for Americans.

House Speaker Nancy Pelosi and Republican Leader John Boehner of Ohio announced the deal in a press conference Thursday.

The higher cap of $625,000, to apply for one year, would breathe life into housing markets in New York, California and other pricey areas because lenders would feel more comfortable knowing Fannie and Freddie can buy and package the loans into securities that investors consider to be relatively safe.

A Freddie Mac spokesman said in an e-mail message that such an increase "would be in the best interest of the market and consumers."

To address the mortgage crisis, the package also raises limits on Federal Housing Administration loans, which are insured by the government in event of default, congressional aides said.

Groups representing Realtors, bankers and home builders, which have been hit hard by the mortgage market downturn, have been lobbying for such changes for months.

The National Association of Realtors has been pushing for a permanent expansion of the Fannie and Freddie limits to $625,000. It calculates that borrowers could save $3,000 to $5,000 per year in reduced interest costs as a result and projects up to 210,000 foreclosures could be prevented since refinancing into lower-rate loans would be easier.

Dale Stinton, the group's chief executive, said in a statement Thursday that increasing the loan limits "is a truly meaningful economic stimulus and should be enacted quickly."

Shares of Fannie Mae

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[FNM  Loading...      ()   ] fell 8 cents to $34.70 in Thursday afternoon trading, while shares of Freddie Mac

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[FRE  Loading...      ()   ] fell 37 cents to $32.15.