February 13, 2008
This afternoon, in a rare display of bipartisanship, President Bush signed landmark legislation enacting a $168 billion economic stimulus package. As previously reported, the measures enacted today included increases in GSE and FHA loan limits. Calling the measure “a booster shot for our economy,” the President went on to specifically call on Congress to pass three MBA supported proposals: regulatory reform for the GSEs; FHA modernization; and authority for state housing finance agencies to issue tax exempt mortgage revenue bonds for refinancing.
February 12, 2008
Last week, legislators on Capitol Hill passed President Bushâ€™s economic stimulus package. An important component of the Bill, Section 2 of H.R. 5140, the Economic Stimulus Act of 2008 directly impacts the mortgage industry by temporarily raising the conforming loan limits in high cost areas across the country.
This legislation allows increases in the loan limits for FHA and the GSEs from 125% to 175% of the median house price in the area of the property for the period 7/1/07 to 12/31/08, resulting in new loan limits from $417,000 to $729,750 for single family properties. The legislation requires HUD to publish revised median house prices and principal obligation limits to implement the legislation “as soon as practicable”, which should be within days or weeks after the bill is signed.
There are several issues with this new law. Most importantly, several high cost states (California and New York come to mind) tie their anti-predatory lending threshold tests to the conforming loan limit. If the limit increases retroactively to last year, then “mini-jumbo” loans that were previously exempt from high cost testing may now be subject to these laws. For example, a loan between $417,001 and $729,000 originated in California or New York in late 2007 may now be required to be retested under the state law anti-predatory lending tests to identify potential violations, unless the state issues policy statements to the contrary.
Another issue is the potential for accusations of redlining, which is the practice of denying credit to residents in certain, often racially determined areas that canâ€™t take advantage of the heightened limits.
The conforming loan limits change will affect PredProtect and HCL. The Interthinx compliance team is preparing to update the systems with the appropriate programming. We will keep you updated as more information develops.
Roger Fendelman, Esq.
Vice President Compliance
Interthinx, Inc., an ISO Company