by Jeanette Fisher
It's an open secret. The American economy is in trouble, and President Bush
acknowledged that fact by unveiling a $150 billion economic stimulus package
recently. However, that package contains no provisions for raising the $417,000
conforming loan limit to allow Fannie Mae and Freddie Mac to begin purchasing
so-called jumbo loans.
The main thrust of the president's plan is to try to stimulate economic
growth through about $100 billion in relief tax cuts and incentives for
individuals, families, and businesses. No specific mention was made about
trying to revive the country’s sagging real markets or the intensely troubled
mortgage lending industry. Disagreements within Congress have continued to
hinder the progress of legislation that would allow Fannie Mae and Freddie Mac to
be able to purchase larger loans, as well.
As far as trying to bolster the housing market, the Bush administration has
concentrated its efforts on FHASecure, which a new FHA loan guarantee program
that would allow some delinquent borrowers who have adjustable-rate mortgages
to refinance using fixed-rate loans, and a voluntary program they can Hope Now,
which encourages lenders to work with borrowers in creative ways to refinance
or restructure their loans rather than moving forward with the foreclosure
process. However, some critics of the plan contend that neither one of those
programs will provide any real help to the nearly two million American
homeowners who are facing foreclosure, especially in light of the fact that
home prices are declining in many areas of the country.
The Mortgage Bankers Association recently estimated that some 384,000 loans
are currently in some stage of foreclosure, although many of those loans don’t
cover owner occupied real estate. There is some good news, though. The MBA also
reported that some 54,000 loans were restructured during the third quarter of
2007 and another 183,000 were modified to establish repayment plans that would
allow homeowners to stay in their houses.
The real estate crunch is far from over, however. The National Association
of Realtors recently suggested that any stimulus package passed by Congress
needs to include an increase in the conforming loan limit for Fannie Mae and
Freddie Mac if the country’s housing market is to recover any time soon.
According to the NAR, simply raising the conforming loan limit to $625,000
would reduce the supply of homes on the market within a couple months, would
strengthen home prices by at least two percentage points, and could increase real
estate activity by more than $40 billion. The NAR also stated that raising
those conforming loan limits could reduce foreclosures by as many as 210,000 in
a relatively short time.
It’s yet to be determined if the Bush package will be amended to reflect
those suggestions. As of this moment, there is no such wording in the plan.
Copyright © 2007 Jeanette J. Fisher
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