Beginning March 6, 2008, President Bush signed into law the Economic Stimulus Package of 2008 which will be helpful for homeowners at risk of foreclosure. The highlight of this plan is that it will increase the loan limit of FHA loans, Fannie Mae and Freddie Mac from $362,790 to $729,750 in high cost metropolitan cities such as: New York, Los Angeles, San Francisco and Washington D.C. Even lower costs cities will benefit from the new loan limit of $271,050. This plan should allow 250,000 families to refinance their mortgages and preemptively avoid foreclosure.
Please note that in January of 2009 the loan limits will return to the old numbers. A couple of years ago, the President introduced a bill to Congress to modernize the FHA by offering flexible down payment requirements and higher loan limits. It would also allow the FHA to take risk into account in calculating premiums to try to force a more rational market and thus avoid surprises. This bill was taken up by the House and Senate separately, but the final bill has not yet been sent to the President.
The most important aspect of this bill is that it will raise the loan limits permanently. However, we must not overlook its attempt to stem future real estate market problems.
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