House Passes Economic Plan; Would Temporarily Boost FHA, GSE Limits

The House of Representatives yesterday voted overwhelmingly to pass a modified version of a $146 billion economic stimulus bill.

Legislators voted 385-35 in favor of the bill, H.R. 5140, although it’s unclear what sort of sailing lay ahead in the Senate. Bloomberg reported that various senators are pushing to make changes to the House bill, although both the Bush administration and House representatives want the Senate to push the House’s version of the bill through quickly.

“We need to get this bill out of the Senate and on my desk so the checks can get in the hands of our consumers and our business can be assured of the incentives necessary to make investments,” Bloomberg quoted President Bush as saying.

Conforming, FHA limits boosted
The House package, while leaving out core reform measures for FHA mortgage lending, would still temporarily boost both the FHA and GSE lending limits to perhaps as much as $729,750, through the end of this year.

For both Fannie Mae and Freddie Mac, the bill calls for loan limits to be boosted to 125 percent of median home prices in a given area, with a hard cap at 175 percent of the current $417,000 conforming loan limit.

The House bill also boosts FHA’s maximum lending limits from $362,790 to 125 percent of a local areas median price, to a maximum limit of $729,750. In addition, HUD secretary Alphonso Jackson would have the discretion to increase FHA-eligible loan limits beyond the 125 percent price level for a given local area by as much as an additional $100,000, assuming there was room under the high-end cap to do so.

(Click here to read H.R. 5140 in the final form passed by the House).

Fannie Mae CEO Daniel Mudd went on Bloomberg television Tuesday to support boosting the conforming loan limit, and expressed his confidence that the GSEs could provide additional liquidity to the mortgage market, while also suggesting that Fannie would look to securitize any jumbo loans it purchases.

The NAR on Tuesday also hailed the House bill as much-needed help for the housing market.

“Our research highlights that increasing FHA loan limits will help an additional 138,000 Americans achieve the dream of home ownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home,� according to president Richard Gaylord.

Senate still looking at housing
A lot will ride on the Senate as to whether or not the temporary — for now — loan limit increases become law; Inman News reported late Monday that Sen. Richard Shelby (R-Ala) has expressed opposition to raising GSE lending limits in the absence of a more complete reform effort — a view shared by OFHEO director William Lockhart.

An op-ed Wednesday in the Washington Post called on lawmakers to carve out the loan limit legislation from the final economic package:

Yes, $417,000 doesn’t buy much house in San Francisco. But isn’t at least part of the answer to let house prices moderate, so that you no longer have to be a plutocrat to live in Beacon Hill or Manhattan? We are told that the increased loan limit would lapse in a year or so. Don’t be too sure: What politician will want to take away this lucrative benefit a year from now? Steamroller or not, someone in the Senate needs to stop it.

Whether or not GSE and FHA loan limits are part of the Senate proposal or not, Charles Schumer (D-NY) said today in a Wall Street Journal story that the Senate is looking further to raise the limits on tax-exempt municipal mortgage revenue bonds as a way to ease refinancing concerns — and that this measure may yet be pushed into the final stimulus bill sent to the President:

Sen. Charles Schumer, a senior Democrat from New York, said the concept could show up as part of the stimulus package working its way through Congress.

“We may be able to get it in the stimulus, but if not, it will bode well in the near future,” he said. “There will be a housing package beyond the stimulus, and it will be in one of the two.”

Majority leader Harry Reid (D-Nev.) has said he wants the Senate to complete legislation by the end of this week.