Here is an email I received from a bank that we work with. It explains what is the preliminary impact of the recent signing of the economic stimulus package with regard to mortgages and getting people financed to purchase a home.

First:The Economic Stimulus Package (H.R. 5140) has many features, one of which is an income tax rebate that will offer $600-$1200 to over 130-million Americans.  Only “qualified” people who file a 2007 return will receive a rebate.  The tax rebate is a one-time cash payment to most American households, which could be mailed as early as May or June; depending on how soon you file your returns.  These rebates are based on your income, how many children you have and whether you receive Social Security or disabled Veterans’ benefits.  Not all of us will receive the money, but 2007 was a year where many people in our Industry earned far less then previous years; so like you, I’m hoping for some money.

Second:  The Economic Stimulus Package has increased the FHA loan limits in “high-cost” areas, based on the median area sales prices and will follow the standard HUD mortgage limit calculation process.  To determine high-cost areas, the calculation factor will increase to 125% of the area median sale price and in no case will it exceed 175% of the area median sales price.  Example: In order to hit the $729,750 limit, the median sale price in your Metropolitan Statistical Area has to be $583,800; San Diego just barely makes it due to a continued rash of declining home valued.  Right now the Bay Area blows away the limit, and will be allowed to go to $729,750.  Orange County makes it easily, while LA County just barely makes the grade.  Fortunately for us the analysis shows that mainly California, Honolulu and a small part of Manhattan will see the limits of $729,750.  This will certainly help us here in California, which is much needed today.

FHA:  The loan limits will not be immediately available.  FHA must assess their internal impacts to determine the delivery approach they will require of mortgage lenders and investors; they then must communicate their requirements to the mortgage lenders and investors.  FHA is going to act quickly, but they too need to go through a series of steps to ensure they do their due diligence before moving forward.  Fortunately for us FHA is a federal agency so they must buy loans at the higher loan limits, and the Secretary of Housing and Urban Development (HUD) must publish the median prices and corresponding loan limits within 30-days of the enactment of yesterday’s legislation.  Hopefully for us it will happen sooner than 30-days, but that is the time allotted for HUD.  For now we wait for the median prices to be posted, then it’s “off to the races”.

FNME/FMAC:  Just because Congress rose the conforming loan limits, it does not mean that Fannie Mae and Freddie Mac have to buy them.  Fannie and Freddie are comprised of mostly private corporations these days.  They’re definitely going to give weight to what Congress has indicated it wants them to do, but they’re not going to completely ignore actuarial concerns; we all know, the bigger the loan the worse the consequence should the loan default.  Remember that a couple of months ago Fannie and Freddie elected not to raise their “conforming” loan limits for 2008, which offers strong suggestion that they will proceed with caution.  Until they come-out and say they have raised their limits to “X”, we will all have to sit back and hope for a positive result; in my opinion, they will follow suit and raise their limits in “high-cost” areas to $729,750.  As per the VP of Business Development at Fannie Mae, they are set to make a statement near the end of the month with instructions and time-lines to follow.

Now that the legislation just passed, we are eagerly waiting on the communications from FHA, Fannie Mae and Freddie Mac as to when they will start buying our loans.  We know FHA must buy them, but until HUD posts the income limits for the areas we won’t know if we can cover the desired loan amount.

We ALL must wait on HUD’s information for FHA and that FNME will let us know by month end.  Once this happens, the Investors will have to re-write their guidelines, matrices, process’s, etc… so I expect that will take a little time.  Be patient, but aware and prepared as this news is some of the best we’ve received in a long-time.