Silicon Valley Realtors praised the passage by the House of Representatives of a $146 billion economic stimulus package which contains an important provision for homeowners: a one-year increase to $625,000 nationwide and up to $729,000 in high-cost areas like the Peninsula and South Bay in the conforming loan limit for loans that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can purchase. The current limit is $417,000.
The National Association of REALTORS®, along state and local Realtor associations, vigorously urged President Bush and Congress to help homeowners and the national economy by loosening constraints on Fannie Mae and Freddie Mac as an integral part of a federal stimulus package.
"The demand for housing has always been strong in Silicon Valley and we have always believed that any stimulus package must address housing issues and increasing the conforming loan limits for these two government-sponsored enterprises," said Julia Keady, president-elect of the Silicon Valley Association of REALTORS® (SILVAR), a professional trade organization representing over 4,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay.
"The increase in loan limits will not only improve liquidity in the mortgage market, but also raise the confidence of homebuyers, which will, in turn, increase sales and economic activity not only in Silicon Valley, but nationwide," said Keady.
Realtors have been seeking from Congress and the administration a plan for a permanent increase in the loan limits for Fannie Mae and Freddie Mac from the current ceiling of $417,000 to $625,000.
"This change will permit more families to enter the housing market by making more mortgages available with lower interest rates. Increased home sales will lower inventories and immediately start stabilizing the housing market and the economy," NAR President Dick Gaylord said.
"This plan will help people purchase a home, and it will also enable homeowners to refinance into a more favorable loan that will save them money," added Keady.
In addition, NAR has been actively advocating for quick passage of the Federal Housing Administration Reform bill. A reformed, modernized FHA program would offer a safe and affordable alternative to subprime mortgages, which are widely blamed for the current high rate of foreclosures and credit crunch.
"FHA reform would not only ensure we don't find ourselves in this very unfortunate situation again, but also it can help many families currently facing foreclosure," said Gaylord.
NAR estimates lifting the GSE loan limit to $625,000 would lower interest payments for consumers who get new "GSE jumbo" loans, reduce the supply of homes on the market by one to one-and-one-half months, strengthen home prices by two to three percentage points, and increase economic activity by $42 billion. An additional report from NAR shows increasing conforming loan limits could help reduce foreclosures by 140,000 to 210,000 and result in an additional 348,000 home sales.
"This is the quickest way to help the hurting housing market," said Gaylord. "As the potential for an economic recession increases and the fragile housing market continues to teeter, raising loan limits and reforming FHA would immediately impact the marketplace without the need for any new, complex federal programs or tax dollars."
"We urge Congress to take these actions to stabilize the housing market and protect homeowners. Potential homebuyers with good credit could save $3,000 to $5,000 a year if they obtain a GSE-backed loan instead of a jumbo market loan. Tax payers who live in high cost areas like California deserve equal access to affordable, government-sponsored loans," Keady said.
The Senate plan, however, does not include the proposal by the House to increase the limits on "conforming" mortgages that can be bought by Fannie Mae and Freddie Mac, or insured by the Federal Housing Administration. Once the package passes the Senate, House-Senate negotiations will ensue, which could slow down their efforts to fast-track the stimulus plan.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.