Summary
The Economic Stimulus Act, approved today, will go along way towards its name, and stimulate the economy. Questions of how much money, too whom, and what may have been sacrified in the cross-party negotiation will remain unanswered, but one thing is clear. Congress has delivered a very potent set of stimulus to the mortgage markets. By increasing the loan insuring (FHA) or purchasing (GSE's) authority to more than $700k, Congress answered a prayer and request of many of those in the industry. The business people know that this gives them a very streamlined and efficient way to originate, fund, and deliver loans to the secondary market and service a large percentage of the population of "A" mortgagors.
Analysis
We should all be excited. The mortgage space had become quite cloudy with the liquidity crisis involving subprime mortgages and the related disappearance of available funds for most Alt-A borrowers. Excellent risk customers, with top notch credit and good downpayments were finding great challenges in getting decent loans. With the expansion of the lending limits, "A" customers should have no trouble finding cheap and available credit. This will be true whether they are pursuing a new home purchase (thus giving a nice shot in the arm to real estate values in most MSA's nationwide), lowering their rate (which has become a very worthwhile endeavor after the Fed's action earlier this week), or even taking cash out to retire debt (which always seems to bring with it more spending).
Whichever side drafted in the legistlation deserves a big round of thanks, because this will make a large difference in aiding a recovery that is more at the cause (than the effect) side of the recession.
I'd write more, but I think I will celebrate myself! At a $725,000 loan limit, this is one benefit that we can say will have more immediate effect than the checks in the mail that most taxpayers will start seeing in June.
