Economic Stimulus and Conforming Loan Limits

Everyone wants to know how the new economic stimulus bill will impact mortgage rates, specifically when we will see the results of the new conforming loan limits. Here what the loan brokers at Union Trust (a Pacific Union affiliate) have to say:

"The bill includes higher conforming loan limits through December 31, 2008. There are still many details to be worked out so it is doubtful if any lenders are going to jump right in until more guidance is issued by HUD. We are expecting that the earliest this will realistically affect loans funding will be in the May-June timeframe (and that is only an educated guess based on how slowly things in politics work). Keep in mind the the new limits will apply to 30 year and 15 year fixed rate, fully amortizing (sorry, no interest only), and owner-occupied. ARMs are being considered, but if allowed, the increase will likely apply to one ARM type (for example, 5/1's).

"Who will likely benefit?
Someone that has a loan amount up to $729,750 and wants a 30 Year Fixed mortgage. A note of caution is that we are uncertain what the final interest rate and closing costs will be since we can safely assume that FNMA and FHLMC will charge higher fees to compensate for the higher risk.
Today the best conforming interest rate, for someone with 720+ credit score and full documentation, is 6% with no points and 5.75% with 1 point. The market continues to be concerned about the inflationary results of the FED's lowering of their overnight rate and if the concerns continues, we will see the conforming interest rate increase.

"The "hot" loan program today is a 5/1 Interest Only Jumbo loan at 5.5-5.625% or a 10/1 Interest Only at 6%. AND these rates and loan programs are available now!"

Now you know what we know.