Good morning!!!!

Tomorrow President Bush is likely to sign into law the recently passed economic stimulus bill. It raises the limit on the size of mortgage that Fannie Mae and Freddie Mac may purchase and that the Federal Housing Administration (FHA) may insure. In both cases, the increases are temporary and apply only to loans originated by the end of 2008. If signed, Fannie and Freddie may purchase loans up to 125% of the median home price in an area, up to a national limit of $729,750. FHA limits, and I assume VA, would see the same increase, and the floor on FHA limits would be raised so that larger FHA-insured loans would become available in low-cost areas. Goldman Sachs believes that area-specific loan limits for the GSEs and FHA should be issued by mid-March. The exact impact on pricing and rates is unknown, nor are the changes in underwriting guidelines and the impact of lost equity: in cities where the increased limits are likely to apply, the Case-Shiller index now stands below its late 2005 levels.

The bill specifically excludes HECM from the new temporary FHA loan limits, and reverse mortgage experts are looking to the FHA Modernization bill to provide them with a single national loan limit (or higher loan limits) for HECMs, along with the several other HECM provisions including the elimination of the authorization cap, HECM for home purchase, HECM for coops, the GAO study and the new limitation on origination fees.

The market is quietly worse this morning on no economic news. The 10-yr is up to 3.67% and mortgage prices are worse by roughly .125.

The IRS will make a payment to roughly 130 million individuals and couples who file tax returns by April 15. The aggregate amount of rebates should total $107 billion in 2008 and an additional $10 billion in reduced tax liability in 2009.  Estimates say that 30 million tax filers will receive rebates as soon as mid-May and the remaining 100 million or so individuals should receive checks at a pace of 9 million per week through the end of July or early August. I will go out and buy some consumer goods to help the economy! Or maybe I’ll just put it in the bank…

PMI effective March 1, will no longer insure loans with LTV or CLTV ratios of 97.01% and above, regardless of the automated underwriting system (AUS) decision. “Desktop Underwriter Expanded Approval I (EA I) AUS recommendations for LTV/CLTV ratios of 95.01% and above are not eligible for mortgage insurance. For Limited Documentation loans, at least 50% of the total qualifying income will need to come from non-salaried sources. A 5-percentage-point LTV/CLTV reduction will be required from the maximum financing allowed for all loan products/programs, not to exceed 90% LTV/CLTV, for properties in distressed markets. In addition, payment options ARMs and A-Minus (FICO scores 575-619) loans for properties in distressed markets are not eligible for mortgage insurance.”

Project Lifeline, a Treasury Department and Department of Housing and Urban Development plan, is targeting at-risk borrowers with all types of mortgages, not just high-cost subprime loans. The plan will allow seriously overdue homeowners to suspend foreclosures for 30 days while lenders try to work out more affordable loan terms. The plan will involve Bank of America, Citi, Countrywide, JPMorgan Chase, WaMu, and Wells Fargo. All six are involved in the Hope Now Alliance, an effort the Bush administration brokered with the mortgage industry late last year to freeze rates on some high-cost subprime mortgages for five years to aid borrowers whose teaser rates are jumping sharply higher. (The new plan applies to seriously delinquent homeowners, those whose mortgages are 90 days or more past due.) The Hope Now Alliance has helped nearly 8 percent of subprime borrowers in the second half of 2007: 545,000 subprime borrowers, or 7.7 percent of 7.1 million subprime loans outstanding as of September. 150,000 were helped through permanent-loan modifications, such as lower interest rates, while 395,000 negotiated repayment plans, which often involve a borrower getting back on track even after missing a few payments.

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