Stimulus Plan to Aid Housing in Pricey Markets
RENEE MONTAGNE, host:
And the checks will be in the mail soon to millions of taxpayers. Tax rebates worth $300 to $600 are part of an economic stimulus package that President Bush is expected to sign today. And there's another element in that package that could be worth much more to homeowners and home buyers in certain high-cost areas.
NPR's Scott Horsley reports.
SCOTT HORSLEY: The stimulus package temporarily redefines how much buyers can spend on a house and still qualify for a mortgage backed by Fannie Mae or Freddie Mac. Up until now, the ceiling for those government-backed mortgages has been $417,000.
Greg McBride of the financial Web site BankRate.com says in pricey coastal markets, that leaves a lot of would-be buyers out.
Mr. GREG MCBRIDE (BankRate.com): In markets like California or New York, $417,000 doesn't buy very much. As a result, a lot of middle-class households were taking jumbo loans.
HORSLEY: So-called jumbo loans are not backed by Fannie and Freddie, so they carry higher interest rates. The economic stimulus package allows Fannie and Freddie to back bigger mortgages of up to $730,000, depending on the market. McBride says that will mean lower interest rates and big savings for buyers in high-cost areas.
Mr. MCBRIDE: For somebody taking a $600,000 loan, that could be a difference of $300 a month.
HORSLEY: The head of the agency that oversees Fannie and Freddie cautions the two government-sponsored entities are already stretched thin, backing over $5 trillion in mortgage debt. If they're going to play an even bigger role in the mortgage market, he says federal oversight should be strengthened to make sure Fannie and Freddie remain safe and financially sound.
Scott Horsley, NPR News, San Diego.