A little below the headlines about the latest housing rescue bill--that is, the Senate’s “Federal Housing Finance Regulatory Reform Act of 2008”--are the details of the bill: one of which could have some serious consequences for big ticket homes.
Under the Economic Stimulus Package passed earlier this year, the conforming loan limit (that is the loans that can be bought by Fannie and Freddie) was temporarily raised, depending on the market’s median home price, to a cap of $729,000.
The thought was that whatever the housing rescue plan, it would include some kind of permanent increase in the limit, so that the GSE’s (Governemnt Sponsored Entities, like Fannie and Freddie) could buy more high-priced loans in high-priced markets.
Originally the Senate plan was to raise the limit to $625,000, but now it appears that number is down to $550,000. Also, the GSE’s would not be allowed to buy jumbo mortgages and hold them in portfolio.
Senator Charles Schumer (D-NY) quickly got himself on record at the committee markup this morning, expressing concern that it would become impossible for anyone to get a jumbo loan because there is no securitization market out there for jumbos currently.
Mortgage consultant Howard Glaser (who counts Fannie and Freddie as clients) breaks it down by states, showing that--according to a preliminary analysis--loan limits would decrease significantly in: California, Colorado, Connecticut, Washington DC, Arizona, Florida, Georgia, Hawaii, Idaho, Massachusetts, Maryland, North Carolina, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Utah, Virginia, Washington and Wyoming.
In a state like California, where the median home price is over $500,000, that’s a problem.