There was a good article in the San Jose Mercury News about the timing of the FHA Reform aspects of the soon-to-be-signed economic stimulus bill. Here is an excerpt:
[I]t could be weeks before consumers will be able to benefit from the mortgage provisions contained in the legislation approved this week.
The bill approved Thursday, which President Bush is expected to sign next week, includes measures that could result in lower mortgage rates for many Bay Area homeowners who are eligible to refinance. And those purchasing homes in this expensive area potentially will qualify for lower rates than they would have received in recent years.
But the logistics of enacting the bill’s changes, and the extent of the savings borrowers can expect, are unknown.
“People are very interested in saving money,” said Todd Flesner, a mortgage broker with Stern Mortgage in Palo Alto. Clients are eager to find out whether they can refinance into a lower-rate loan. But he cautions, “People who are looking to take advantage of this need to prepare to be patient.”
The bill, known as the Economic Stimulus Act of 2008, will temporarily increase the limits on loans backed by government-sponsored mortgage financing companies known as Fannie Mae and Freddie Mac, and on Federal Housing Administration loans, to as much as $729,750. These loans typically carry lower interest rates.
The new loan limit will vary by geographic region, and will be set to 125 percent of an area’s median home price, up to a maximum of $729,750.
The U.S. Department of Housing and Urban Development has up to 30 days from the time the bill becomes law to decide what loan limits apply in various parts of the country. In Santa Clara County, where the median price in December was $739,000, according to DataQuick Information Systems, it’s likely the maximum limit will apply.
The stimulus plan also will allow the FHA to guarantee loans of up to $729,750. Before the boom in subprime lending, FHA loans were the first choice of borrowers with damaged credit and little down payment. But FHA loans have hardly been used in Silicon Valley recently, because their ceilings were too low. That could change now.
Both the FHA and the conforming loan changes will be effective through Dec. 31, 2008.
