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The Recovery Rebates and Economic Stimulus for the American People Act of 2008 and Jumbo Mortgages, March 26, 2008 1 (March 26, 2008)

handle is hein.tera/crser0210 and id is 1 raw text is: Order Code RS22799 Updated March 26, 2008 ACRS Report for Congress The Recovery Rebates and Economic Stimulus for the American People Act of 2008 and Jumbo Mortgages N. Eric Weiss Analyst in Financial Economics Government and Finance Division Summary H.R. 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008,' 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. This report will be updated as events warrant. H.R. 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008, would increase the conforming loan limit for mortgages originated between July 1,2007, and December 31,2008, to a maximum of $729,750 in high-cost areas. This 'H.R. 5140 was introduced in the 110th Congress by Representative Nancy Pelosi on January 28, 2008, as a bipartisan bill with 15 cosponsors. It was passed by the House and sent to the Senate on January 29, 2008. The Senate passed the bill on February 7, 2008. Congressional Research Service The Library of Congress Prepared for Members and Committees of Congress

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