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US House OKs Jumbo Loan Increase As Part Of Stimulus Plan

As part of a newly-proposed economic stimulus plan under consideration on Capitol Hill, the U.S. House proposed an increase in the size of home loans that can be purchased by Fannie Mae and Freddie Mac. The National Association of REALTORS® sent a letter to Congress urging this move earlier in the month.

The conforming loan limit will rise to $729,750 for one year. The current limit is $417,000. The Federal Housing Authority will also be allowed to indefinitely insure loans up to the same level, which is currently set at $367,000.

“The stimulus package announced today is a positive step toward strengthening the housing market and our economy,” NAR President Dick Gaylord said in a public statement. “The increase in loan limits should provide liquidity to the mortgage market in all parts of the country allowing qualified home buyers who may have been on the sidelines to enter the market.”

NAR estimates that the increase would strengthen current home prices by 2-3 percentage points, reduce the supply of homes on the market to one to one-and-one-half months, generate $42 billion in increased economic activity and possibly reduce foreclosures by 140,000 to 210,000.

In high cost states, such as Massachusetts, home buyers with good credit could save up to $5,000 a year by not being forced into the current jumbo mortgage market, according to NAR.

Source: NAR

One thought on “US House OKs Jumbo Loan Increase As Part Of Stimulus Plan

  1. Eric Hundin says:

    I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Eric Hundin

  2. Doug Willis says:

    Lets hope this makes it through the Senate and becomes law. This will provide a much needed boost to states such as California, NY & MA. Too bad we don’t index everything like we do the FICA tax. If we did we would be much better off from an economic perspective. Just think if we raised the standard deductions5-6% per year.

  3. Peter says:

    The raise in conforming loan limit has no effect on the end customers. I live in Boston area, but when I called up Amerisave they told me that it didn’t matter what the conforming loan limit was ($465,000). All of their lenders still considered anything over $417000 to be a jumbo loan. So the NAR is completely wrong. Buyers with good credit in high cost states are still being forced into jumbo loans. The raise in limits has no effect since no lenders are adhering to the limits, and therefore will not stimulate the economy.

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