As most all you might already know, Congress recently passed, and President Bush signed, a $168 billion Economic Stimulus Package. Included in the package is an increase to the standard government-sponsored enterprises (GSE’s) and Federal Housing Administration (FHA) maximum loan limits. However, due to the extensive product, pricing, and delivery implications of the legislation (within Fannie Mae, Freddie Mac and the FHA), the increased loan limits will likely not be available for at least sixty days. I will be sure to post any changes as they happen. Specific details of the Stimulus Package are not yet finalized; however, below you will find an overview of the requested changes:

Overview GSE/FHA loan limit increases are temporary and will be terminated on December 31, 2008.

GSE/FHA loan limits will increase to the lesser of (a) 125% of the area median home price or (b) $729,750. The increased loan limits will be available only in high-cost areas (such as ours) – these “high-cost areas” will be defined by HUD in the next thirty days. Early indications are that only a few metropolitan statistical areas (MSAs) will be impacted – the majority of which will be located in California, South Florida, Washington D.C. and New York City.

1. The US Department of Housing and Urban Development (HUD) must define which high cost areas or MSAs will be eligible for the increased loan limits (this is expected to happen within the next thirty days).

2. Fannie Mae and Freddie Mac must determine and communicate what products will be eligible for delivery under the increased loan limits, clearly define the underwriting guidelines that must be followed and compute how these loans will be priced. Additionally, Fannie Mae and Freddie Mac will have to determine how lenders will deliver these conforming-plus loans.

3. Lenders will have to work to build new products and implement all systems and guideline changes to ensure a seamless transition. Once it is determined how the legislation will be applied and have clear guidance from Fannie Mae and Freddie Mac, Lenders will have to implement these changes in a timley fashion.