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.