Number: RS22799
Title: The Recovery Rebates and Economic Stimulus for the American People Act of 2008 and Jumbo Mortgages
Authors: N. Eric Weiss, Government and Finance Division 
Abstract: H.R. 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008,1 would temporarily increase the maximum size of loans that Fannie Mae and Freddie Mac can purchase, and that the Federal Housing Administration (FHA) can insure. These new maximums would vary depending on area housing prices, but would be $729,750 or less. The likely result of these provisions would be to reduce interest rate and mortgage payments on mortgages above the current $417,000 limit. For example, the monthly principal and interest payments on a 30-year fixed-rate mortgage for $600,000 are likely to fall from $3,824 to $3,377, saving $447 per month. Monthly tax and insurance payments would be additional. A mortgage of this size would require an annual income of more than $140,000. This could stimulate the demand for housing costing $429,900 to $768,000. Fannie Mae and Freddie Mac probably would conduct cost-benefit and risk analyses of making these loans. The Department of Housing and Urban Development (HUD) could insist on reviewing these new products. Regardless of its decision on reviewing the programs, HUD would be required to calculate and publish the new loan limits. A possible result of these procedures would be to slow Fannie Mae's, Freddie Mac's, and FHA's implementation of the programs.
Pages: 4
Date: March 26, 2008