The house version of the economic stimulus bill approved by the House of Commons today would increase the conforming loan limit to as much as $729,750 in areas where home prices are highest. Conforming loans are loans that are guaranteed by Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), thus making them more desirable for investors who purchase mortgages. Interest rates on conforming loans tend to be lower because they are less risky for investors. That is good news for borrowers.

Specifically, the approved bill permits Fannie Mae, Freddie Mac, and the Federal Housing Administration to guarantee purchase loans up to 125% of the median home price for a given area, but only until the end of 2008, with a cap of $729,750.00.

This is very good news for people in our area. In Palo Alto 463 single family residences were sold in 2007 with a median sales price of $1,555,000 (data from the Silicon Valley Multiple Listing Service.) In Santa Clara County, 4163 single family homes were sold through the Multiple Listing Service, with a median sales price of $905,000. Even if the new limits are approved, the $729,750 cap will not meet the needs of our clients, but it certainly will help.

The good news is tempered by the fact that the senate has its own ideas as to what should or should not be approved, and rumors abound that they do not want to increase the conforming loan limits. I encourage every person who is reading this article to contact Senators Dianne Feinstein and Barbara Boxer to request that they work to keep this provision in the senate version of the bill. You CAN make a difference! Thank you.