Now That’s A Simulus!

Many folks are talking about the proposed economic stimulus package, and the rebate checks. For those playing ostrich, here’s what the LA Times says:

Details were still being finalized but it appeared likely that the rebates — $300 to $600 per filer — would go to taxpayers who earn $75,000 a year or less. Couples who file jointly would receive as much as $1,200 as long as they earned less than a total of $150,000 a year. The size of the rebates would be phased out at income levels above those limits.

In addition, families eligible for the rebates would receive an additional $300 per child. Roughly 117 million households would get a check, the leaders said.

That’s a short term stimulus — yes, we can use $1,500, but that won’t be a significant boost.

However, there is one thing in the package of real significance, if I’m reading it right: “The package also includes a provision to make refinancing mortgages easier by raising the limit to $625,500 for most government-backed housing loans.” Specifically:

Currently, the government’s mortgage guarantors, Fannie Mae and Freddie Mac, can purchase mortgages only up to $417,000, and funds have largely dried up for homeowners who want to refinance mortgages above that limit.

The legislation would temporarily raise that limit to $625,500, making it easier for banks to make loans to homeowners who owe more than $417,000 on their mortgage. It would also raise the limit on loans guaranteed by the Federal Housing Administration to $729,000.

I read this as raising the conforming loan limits, meaning that many folks in Southern California that are now in Jumbo mortgages can refinance into 30-year conventional conforming mortgages. That’s significant: according to my loan broker, right now there is almost a 1% difference between conforming and jumbo loans. Combine that with the ¾% drop by the fed (which should trickle down in a few weeks to the mortgage market), and you’re going to see an uptick in folks being able to qualify for fixed loans at terms they can afford. That will help stabilize the whole forclosure mess, as well as providing people (possibly) with more cash, every month, for 30 years.

I hope the raising of conforming limits remains in the package. Wonder if I should write my congress critters (Feinstein, Boxer, and Waxman)?