Designed to "jump-start the ailing U.S. housing market," the current federal economic stimulus plan includes a proposal to increase the size limit on loans from mortgage financiers such as Fannie Mae and Freddie Mac. At the moment, the limit is set at $417,000. With this proposal, the loan limit would go up to $729,750.
According to this post at TheTruthAboutMortgage.com, "the hope is that the easing of the loan limits will allow homeowners in more expensive housing markets to obtain more favorable financing, which in turn should promote sales and uphold home prices."
However, not everyone is quite so optimistic. This article by Al Yoon of Reuters gives a more cynical view than the opinion over at TheTruthAboutMortgage. Yoon fears that raising the loan limit might unintentionally raise mortgage rates, since "increasing the eligible loans to $729,750 from $417,000 would change the characteristics of mortgage-backed securities, leading traders to exact a premium for increased interest-rate risk." Higher mortgage rates would in turn, of course, "make it even harder to unload already high housing inventories and existing homes on the market, delaying any housing recovery and potentially extending the U.S. economic slowdown."
We're curious what you think about the economic stimulus proposal and its hope to increase loan limits . Go ahead and read both articles (click on the links provided) and let us know your prediction!
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