Community News

Published in the Bozeman Chronicle, March 2008. On February 13, 2008, the economic stimulus package was signed into law by President Bush. This package includes many provisions which are important to the housing market, most notably increasing the loan limits for Fannie Mae and Freddie Mac (GSE) and the Federal Housing Administration (FHA). The National Association of Realtors ® (NAR) has shown great support for this package and predicts a jumpstart in the housing market which will help countless families and the U.S. economy as a whole.

According to research conducted by the NAR, increasing the FHA loan limits could assist 138,000 Americans enter the housing market and will also give almost 200,000 homeowners the opportunity to refinance and ideally keep their current homes. Additionally, an economic impact study estimated that increasing the GSE's loan limits could lead to as many as 500,000 refinanced loans and reduce foreclosures by 210,000. It is also anticipated that over 300,000 additional home sales could occur; there would be a reduction in housing inventory; and the prices for homes would increase and strengthen. The belief is that by increasing the loan limits for Fannie Mae and Freddie Mac, there will be improved liquidity in to the nation's much-stressed mortgage market.

To use some numbers to put this in perspective, the FHA limit will increase to as much as $729,750 in high-cost areas (to 125% of local median home prices) for loans approved on or before December 31, 2008. The GSE limit will increase up to $729,750 for loans originating after July 1, 2007, to December 31, 2008. Fannie Mae and Freddie Mac are currently topped out at $417,000. Please keep in mind these figures are estimates and not yet official figures.

For those not familiar with FHA or GSE loans and their importance to the housing market, FHA loans– which are a part of the U.S. Department of Housing and Urban Development (HUD) – are insured loans, so lenders can generally offer better deals. They are often popular with first-time homebuyers with a down payment as low as 3% of the purchase price, and most of the closing costs and fees can be included in the loan.

Fannie Mae exists to expand affordable housing and operates in America's secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Freddie Mac purchases, securitized, and invests in home mortgages, and ultimately provides homeowners and renters with lower housing costs and better access to home financing.

Of course, the economic stimulus package is really somewhat of a short-term answer to a bigger issue. Additionally, the loan limit increases will only be in effect for the current year. The FHA and GSE Reform Bills are currently in the works, but not yet passed into law. However, this package should meet its goal of giving the housing market a boost as well as jump-starting overall consumer spending.

NAR's President, Dick Gaylord, recently reiterated the fact that with more affordable financing options, lower housing prices, and historically low-interest rates, buying a home now is more affordable than it has been in many years. Furthermore, homeownership is still the best way that most Americans can build their wealth and is one of the best long-term investments a person can make.

Robyn Erlenbush is the owner of ERA Landmark Real Estate (with offices in Bozeman, Big Sky, Livingston, and Clyde Park) and Intermountain Property Management. She can be reached at robyn@eralandmark.com.