Posted by Tim Burrell - The Senate Finance Committee has approved an economic stimulus package that does not include an increase in the limits for loans by Fannie Mae and Freddie Mac (commonly called GSE's), and does not include an increase in the limits of the guarantees allowed by the FHA.   The stimulus package passed by the House of Representatives in HR 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008,  includes increases in the amount of Fannie Mae and Freddie Mac loans to 125% of the median price for homes in high cost areas, with a cap of $729,750.  The House bill would also allow FHA to guarantee loans up to 125% of the median price in high cost areas, with the same cap.  This increase would be temporary, as it would expire at the end of they year.

Now is the time to contact your Senator and explain the obvious: THE PROBLEM IS REAL ESTATE LOANS, STUPID

The main source of the economic problems, and possible recession, is the lack of availability of real estate financing.  The exotic loans that used to allow a segment of the market to buy homes do not exist any more.  The standards for qualifying for nearly all loans have been raised, a second shrinking of mortgage funding.  With the increase in housing prices in many areas, conventional loans that are limited to $417,000 or less do not allow "regular folks" to buy a home in those areas.

The House bill would allow the limits on the conforming loans that "regular folks" need to go up.  This would allow more people to buy houses in the areas hardest hit by foreclosures.  The National Association of Realtors projects that this increase would prevent about 200,000 foreclosures nationwide.  Decreasing foreclosures would help consumer confidence, not only in the housing market but in the economy in general.

It is hard to imagine any reason for the action by the Senate.  The problem is a sudden decrease in the availability of real estate financing.  Why not deal with that problem by providing a short term increase in that financing?

The House bill would increase the availability of loans, and cost the consumer nothing.  The Sentate is concentrating on giving money from the US Treasury to taxpayers, and proposing amendments to give money to recipients of Social Security, both of which will eventualy cost taxpayers.  The money given to consumers will be used to buy consumer goods at WalMart and Best Buy.  We need something that will allow consumers to buy houses.  Also, the increase in loan limits is temporary, so that it is not a long term authorization which means any potential problems are limited in duration.

This difference between the House of Representatives and the Senate gives you a better appreciation for our form of government.  The Founding Fathers wanted to have a body in the legislature that was more in touch with the people, and they created the House of Representatives.  The Senate has only two members from each state, and focuses on larger pictures, but is less in touch with what is happening with "regular folks".

The National Association of Realtors is making an effort to have Realtors contact Senators to point out this mistake.   It would be even more important for consumers who are not Realtors to contact their Senators, so that the national importance of this mistake is felt, and the Senators cannot dismiss this as a self serving effort by Realtors.

This increase in the conforming loan limits is not as important to Raleigh real estate, and all of the real estate in the Triangle.  A loan of $417,000 will buy more than the average home in this area.  But increasing these limits will allow more people to buy the more expensive Raleigh real estate and Cary homes, and move into a Chapel Hill house.  More importantly, this increase will help the areas in the United States that have large amounts of foreclosures.  Decreasing foreclosures will be good for the entire economy, which will help our area.

Please contact your Senator and ask the Senate to face the problem head on.  Since the problem is a decrease in real estate financing, provide a temporary increase in that financing.