Key Provisions of the Bill (Source: NAR)

Note these are temporary increases that expire on December 31, 2008. I. FHA The mortgage limit provisions include four temporary changes for the FHA program. (As a reminder, the FHA modernization bill includes higher mortgage limits. It is possible that legislation could make this provision permanent or limit the FHA maximum limit to $417,000 as the Senate bill does.)

*Raises the base loan limit ("floor") to 65% of the current GSE limit ($417,000) = $271,050. This provision is effective the day the President signs the bill.

*Raises the maximum FHA loan limit from $362,750 to $729,750 (175% of GSE limit $417,000)

*Secretary has the discretion to raise the maximum loan limit by $100,000 in an area at the $729,750 limit for any size residence (including 2-4 family units).

Only "high cost areas in California and Hawaii (Honolulu) are likely to increase to the $729,750 maximum. Washington D.C., for example, will increase to about $600,000 based on our analysis of available data. See spreadsheet for estimated limits. While we developed these limits following the FHA mortgage limit methodology, they are subject to possible change. At your discretion, we do believe that you can start taking applications at the higher figures w/ the appropriate caveats.

*Increases the calculation factor from 95% to 125% of area median sales price for determining "high cost" areas. We have an updated list of affected areas.

*Implements Fannie Mae/Freddie Mac ratios for calculating maximum loan amounts for two-, three- and four-family units in all of the above categories. Fannie Mae and Freddie Mac two-, three- and four family unit properties increase the same percentage that the single family limit increases. In 2006, the GSE single family limit increased 15.95% and the mortgage limits for multiple units increased 15.95%.

This change should result in a significant increase in FHA limits for multi-unit properties. In the past, FHA used fixed percentages of the single family limit (i.e. 107% of single family for two family unit, 130% for three-family unit and 150% for four-family units). For example, under the new provision, if the single family limit increases slightly over 100% in a "high cost area" (from $362,790 to $729,750), we would assume the multiple unit amounts would increase the same percentage (slightly over 100%).

II. Fannie Mae & Freddie Mac The bill raises the GSE maximum loan limit to $729,750. The bill states that the GSE limits should follow the HUD mortgage limit calculation process and therefore the GSEs and FHA will have the same limits in areas that exceed $417,000. Fannie Mae and Freddie Mac's current limit will, in effect, become their "floor" ($417,000). As the attached chart demonstrates, there are a number of markets that will benefit from this change to the GSE mortgage limits though not as many as NAR advocated. NAR will continue to advocate for broader expansion of the loan limits. Since this is a new process for the GSEs, we would recommend waiting until the maximum limits are announced for Fannie Mae and Freddie Mac. Markets affected by new loan limits – estimates provided by NAR based on HUD data, but subject to change. 1. MSAs (HUD terminology for markets) @ $729,750 State Area/MSA Proposed Limit CA San Francisco $729,750 CA San Jose 729,750 CA Los Angeles 729,750 CA Anaheim 729,750 CA San Diego 729,750 HI Honolulu 729,750 2. Major MSAs (markets) above $417,000 DC/VA/MD Washington DC Area $600,000 NY/NJ New York/New Jersey New York City Area/ Northern New Jersey 595,125 MA Boston 518,375 WA Seattle 493,375 CA San Bernadino/Riverside 487,500 MD Baltimore 462,500 CA Sacramento 443,750 FLA Miami-West Palm Beach 433,500 3. Major MSAs (markets) between FHA "floor" and $417,000. GSE "floor" is $417,000. These are only applicable to FHA. NM Santa Fe $388,750 CT New Haven 387,500 NV Las Vegas 369,375 RI Providence 363,750 UT Salt Lake City 362,750 PA Philadelphia 362,500 IL Chicago 358,000 VA Richmond 347,500 OH/Ky Cincinnati 337,500 FLA Orlando 333,500 CO Denver 328,125 AZ Phoenix 319,125 MN Minneapolis - St. Paul 312,375 NC Charlotte 303,250 FLA Jacksonville 294,250 PA Pittsburgh 287,500 Stimulus Package Talking Points

• More loans available so more people can buy. Fannie Mae and Freddie Mac, government backed loan agencies, guarantee mortgages, which make the mortgages attractive on the secondary loan market. Increasing the Freddie and Fannie loan limits means more mortgages will be able to be guaranteed, hence increasing the number of loans available and increasing the number of people able to engage in a housing transaction this year. Increased activity in the housing sector will have a positive impact on the economy.

• Less expensive loans reduce monthly payments. Previous loan limits kept many people from buying homes in higher priced areas because loans exceeding the $417,000 limit are subject to higher "jumbo" loan rates. With the passage of the stimulus package, people in higher priced areas can obtain less expensive loans, reducing their monthly payment by (insert an example here of the difference a one percent less mortgage rate would make on the monthly repayment of a loan figured at your region's median sale price) saving them tens of thousands of dollars over the life of the loan.

• Act now. These loan limits are only intended to be in effect through the end of the year. Combined with the low mortgage rates, this is clearly the time to act.

• More FHA loans available. The increased loan limits for the FHA program will afford eligible buyers with an opportunity to qualify for a conventional loan. NAR estimates that increasing FHA loan limits will help an additional 138,000 Americans achieve homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home.

• Refinancing can save hundreds of dollars per month. Nearly half a million people with higher priced jumbo loans will be able to refinance to conforming loans under the provisions of the bill, saving these people $274 to $411 a month, according to NAR estimates.

• Higher loan limits should kick start the housing market. NAR estimates that increased loan limits will help generate additional home sales, thereby reducing inventory and strengthening home prices by two to three percentage points.

• Positive growth in the housing market is good for the economy. Real estate accounts for approximately 20 percent of the GDP.

According to NAR Research: • Increasing FHA loan limits will help an additional 138,000 Americans achieve the dream of homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home.

• In addition, NAR believes that increasing the loan limits for Fannie Mae and Freddie Mac will bolster the severely stressed housing finance market by immediately infusing much needed liquidity into the nation's mortgage market. "While such an increase will not solve the full range of housing challenges, it will play a vitally important role in improving the nation's economy and making the dream of homeownership more attainable for thousands," said Richard Gaylord, NAR President.

• An economic impact study conducted by NAR earlier this month estimated that increasing the GSEs' (Fannie Mae and Freddie Mac) conforming loan limits would result in as many as 500,000 refinanced loans and could help reduce foreclosures by as much as 210,000.

• In addition, over 300,000 additional home sales could be generated, housing inventory would be reduced and home prices would be strengthened by two to three percentage points. "These are real results and will have an immediate and sustainable impact for families across our country," said Richard Gaylord, NAR President.

• FHA mortgages are used most often by first-time homebuyers, minority buyers, low- and moderate-income buyers, and buyers who cannot qualify for conventional mortgages because of high loan-to-value or payment-to-income ratios. Despite its successes as a homeownership tool, FHA is not a useful product in high cost areas of the country because its maximum mortgage limits have lagged behind the median home price in many communities. As a result, working families such as teachers, police officers and firefighters are unable to find and purchase housing in the communities where they work. Increasing the FHA loan limits will allow the FHA program to keep pace with home price appreciation that is constantly occurring in all markets of the country.

Stimulus Package Source Documents

Jan. 17 – NAR Press release http://www.realtor.org/press_room/news_releases/2008/stimulus_package_must_include_loan_limit.html

Jan. 17 – letter from NAR to Hon. Nancy Pelosi http://www.realtor.org/fedistrk.nsf/files/letter_cll_pelosi.pdf/$FILE/letter_cll_pelosi.pdf

Jan. 29 – NAR Press release http://www.realtor.org/press_room/news_releases/2008/nar_says_economic_stimulus_legislation.html

Feb 7 – NAR Press release http://www.realtor.org/press_room/news_releases/2008/fannie_freddie_reform_impact_housing.html

Feb. 8 – NAR Press release http://www.realtor.org/press_room/news_releases/2008/nar_hails_passage_of_stimulus_package.html

Glossary of Terms

Conforming Loan: Fannie Mae is authorized by the United States Government to purchase residential mortgage loans. Fannie Mae worked with Freddie Mac to develop uniform mortgage documents and national standards for what would come to be known as a conforming loan. When Fannie Mae announces that it will buy a certain type of loan, local lending institutions often change their own regulations to meet the stated criteria.

Fannie Mae: Formally known as the Federal National Mortgage Association (FNMA), Fannie Mae is a privately owned corporation that provides a secondary market for mortgage loans. Fannie Mae sells government-guaranteed FNMA bonds at market interest rates in order to raise funds to purchase loans. FNMA is the nation's largest purchaser of mortgages.

Federal Housing Administration (FHA): The FHA operates under the Department of Housing and Urban Development (HUD), and does not build homes or lend money itself. Rather, the FHA insures low-down-payment mortgages on real property made by approved lending institutions. It does not insure the actual property, but it insures the lender against loss. The term FHA loan, then, refers to a loan that is not made by the agency, but is insured by it. A loan guarantee by the FHA states that a percentage of the loan will be underwritten by a mortgage company or banker.

Freddie Mac: Also known as the Federal Home Loan Mortgage Corporation, Freddie Mac is a subsidiary of the Federal Home Loan Bank system. Freddie Mac has the authority to purchase mortgages, pool them, and sell bonds in the open market with the mortgages as a security.

Government Sponsored Enterprise (GSE): The government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The goal of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors: agriculture; home finance; and education. Fannie Mae and Freddie Mac are two of the mortgage finance GSEs.

Jumbo loan: A jumbo loan refers to a mortgage with a loan amount above the industry-standard definition of conventional conforming loan limits. This standard is set by the Fannie Mae and Freddie Mac. The average interest rates on jumbo mortgages are typically greater than is normal for conforming mortgages, and vary depending on property types and mortgage amount. Loans above the conforming limits may be offered by seller servicers of these wholesale institutions, as well as Wall Street conduits who provide warehouse financing for mortgage lenders.

Metropolitan Statistical Areas (MSAs): This is the formal definition of a metropolitan area, as set forth by the Office of Management and Budget. MSAs are delineated on the basis of a central urbanized area--a contiguous area of relatively high population density.

Nonconforming Loan: A buyer who wants to place a jumbo loan would search for a lending institution that is making portfolio loans--lending its own money and taking mortgages it intends to hold in its own portfolio without selling them to secondary investors. These portfolio loans are known as nonconforming mortgages because they do not have to meet uniform underwriting standards and can be flexible in their guidelines.

FAQs

Economic Stimulus Package Questions & Answers

1. What is the legislation, specifically? The stimulus package temporarily raises the maximum size of mortgages that government-sponsored mortgage companies (Fannie Mae and Freddie Mac) can buy and market as securities from $417,000 to as high as $729,750 in the most expensive markets, and within that range in less expensive markets. By increasing the Freddie and Fannie loan limits, more mortgages will be able to be guaranteed, hence increasing the number of loans available and the number of people able to engage in a housing transaction this year.

2. What are the potential benefits of the economic stimulus package to me as a homebuyer? Homebuyers needing bigger loans typically have had to apply for jumbo loans that carry a higher interest rate than "conforming loans" and tougher qualification requirements. Raising the conforming loan limit from $417,000 to as high as $729,750 in some market areas will allow more people to buy homes at a lower interest rate. The conforming loan limit will be tied to the market area's median home price, which is set by the Federal Housing Administration.

3. How do I benefit as a home seller? Home sellers can benefit from a larger pool of buyers who will be able to get bigger loans at lower interest rates. Therefore, a buyer who couldn't afford to buy your home last year may now be able to do so.

4. How do I benefit as a homeowner? Homeowners with non-conforming or jumbo loans also could benefit because they could refinance a large existing mortgage into a new conforming loan that carries a lower interest rate. Nearly 500,000 people with higher priced jumbo loans will be able to refinance to conforming loans under the provisions of the bill, saving these homeowners $274 to $411 a month, according to estimates by the National Association of Realtors® (NAR). 5. Will this help me if I have issues with my credit? The increased loan limits for the Federal Housing Administration (FHA) program will afford people with possible credit issues an opportunity to qualify for a conventional loan. NAR estimates that increasing FHA loan limits will help an additional 138,000 Americans achieve homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home.

6. Will this help me if I am at risk of foreclosure? It could help some homeowners who couldn't refinance under the conforming loan limit of $417,000, unless their credit is already impaired. An economic impact study conducted by NAR earlier this month estimated that this increase in conforming loan limits would help prevent as many as 210,000 foreclosures. On Feb. 12, U.S. Treasury Secretary Henry Paulson announced steps to help borrowers in danger of foreclosure stay in their homes by offering a 30-day freeze on some foreclosures while loan modifications are considered. Several major banks have agreed to participate. 7. Could this affect home prices? Home prices could be strengthened by two to three percentage points, NAR reports. And more than 300,000 additional home sales could be generated nationally and housing inventory would be reduced.

8. When will I know the exact conforming loan limits for my area? The U.S. Department of Housing and Urban Development is planning to announce the conforming loan limits for different parts of the country in early March. In the meantime, lenders are expected to approve some loans in anticipation of what the new limits might be.

9. For what period of time will this legislation be in effect, and why is it temporary? According to the legislation, eligible loans must be made between July 1, 2007, and Dec. 31, 2008, when the conforming loan limits would revert to existing levels, unless Congress extends the cutoff date. This legislation is for a temporary period of time as a means to stimulate the economy as much as possible, creating in effect a strong call to action. Combined with existing low mortgage rates, this is clearly the time to act.

Brewster single Family homes saw a slight decline in number of units sold and a dip in median price during 2006 and then a strong price recovery in 2007 but with a reduced number of sales. The condo market in town, dominated by Ocean Edge has seen a significant decline from the highs of 2005.

Orleans – The condo market in Orleans has been relatively steady in median price and declining in number of units over the last 3 years. Single family homes dipped in median price 2006 but recovered a little lost ground through 2007. The number of units sold is up.

Eastham single family homes have been steady over the last three years in quantity and median price, even showing a slight rise in 2007. Condo sales in 2007 were dominated by the new popular development at Brackett Landing.

Wellfleet single family homes dipped in 2006 in number of units. 2007 showed decrease in median price and a recovery in the number of units. Condo sales in town have been rising and at a lower median price.

Recent Quotes about the Positive Signs in the Real Estate Market:

Helping Homebuyers and Sellers Navigate the Market ? "What consumers see in the newspapers and online is based on the view of the national market from 50,000 feet. Those numbers don't reflect the true story in any single marketplace."

? "We have to get localized and start showing consumers that real people just like them are successfully buying and selling homes in this market. The price range has nothing to do with it; it's all relative to what you do with it."

? "For the people that have been in their homes for four years or longer, the possibilities of what they can do in this marketplace are tremendous – especially if they look in their own market."

? "I always urge consumers to talk with a professional, and to look at their individual situation. You never know what you can do until you ask and investigate."

-- Tom Kunz, president and CEO, Century 21 Real Estate LLC, "Taking a Stand," by Stephanie Andre, Real Estate magazine, November 2007.

The Big Picture: Homeowners Still in Good Shape ? If prices more than doubled as they did in 33 metropolitan markets between 2001 and 2006, even 10% and higher average price drops in once-booming areas of California and Florida have left long-term owners with most of their paper gains intact. For the vast majority of owners, the giveback has been a modest fraction of the price gains of the previous five years.

? Bottom line: The housing price correction cycle continues in many -- not all -- parts of the country. But in the absence of a recession or major capital markets crisis, most homeowners' equity stakes are intact.

-- "Price Drops are Sobering, but the Big Picture is Still Rosy," Kenneth R. Harney, Los Angeles Times (registration required), Nov. 18, 2007.

NAR Says: Median Home Prices Rise in Most Metros In the third quarter, 93 out of 150 metropolitan statistical areas show increases in median existing single-family home prices from a year earlier, including six areas with double-digit annual gains and another 21 metros showing increases of 6% or more, according to the latest quarterly survey by the National Association of Realtors®. Regionally, prices rose in both the Northeast and Midwest, as did the national condo price.

"What's really important for consumers is to make informed decisions based on individual needs, desires and timelines in a given area. Most people plan to stay in a home for 10 years, and for buyers with a long-term view, housing is an excellent investment."

-- Richard Gaylord, NAR President, "Median Home Prices Rise in Most Metros, Majority Show Modest Gains," RISMedia.com, Nov. 26, 2007.

NAR Survey: Consumers Bullish on Buying a Home According to the National Housing Pulse Survey by the National Association of Realtors®, nine out of 10 consumers say buying a home in today's housing market remains a good deal, and 59 percent of those surveyed said right now is a good time to buy a home.

-- "Buying a Home Remains a Good Deal," by Broderick Perkins, Realty Times, Nov. 26, 2007.

Regional Update: Good News from Several Markets Around the Nation

What Bubble? Top 10 Cities Where Home Prices are Rising Here are the top 10 cities where home prices are rising, the median home price and how much prices have risen in the last year, according to Forbes magazine. Click here for a slideshow.

1. Salt Lake City, Utah $233,100 +21.9% 2. Binghamton, N.Y. $111,200 +19.8% 3. Salem, Ore. $227,900 +16.7% 4. Farmington, N.M. $201,900 +14.0% 5. Allentown-Bethlehem-Easton, Pa.-N.J. $274,500 +12.8% 6. Beaumont-Port Arthur, Texas $127,700 +11.8% 7. Reading, Pa. $157,800 +11.2% 8. Glens Falls, N.Y. $175,700 +10.7% 9. Spokane, Wash. $197,700 +10.4% 10. Cumberland, Md.-W. Va. $109,300 +9.3%

-- "Ten Rising-In-Value Real Estate Markets," by Deborah Orr, Forbes, Nov. 8, 2007.

New Jersey Home prices were up 3.6 percent from the same period last year, according to the National Association of Realtors®. That may reflect high demand in New York City, which is in the same statistical area. "The region has held its value because it is close to New York and good corporate jobs. There's always a supply of buyers."

-- Robert Abbott, co-owner of a Ho-Ho-Kus, N.J. agency, "As N.J. House Sales Fall, Prices Still Rise – Only More Slowly," by Kathleen Lynn, The Record,

The Price (and the Time) is Right for Buyers

"It is an amazingly good time to buy a house, and not a bad time to sell one if you are going to 'move up' -- that is, buy a house 25 or 50 percent more expensive than your current house -- because you end up catching a proportionately bigger price break on the new house than you may be giving on the old house." -- Ken Baris of Jordan Baris Realtors, "The Case for Right Pricing," by Antoinette Martin, The New York Times (registration required), Oct. 7, 2007

If the deal of a lifetime or the house of your dreams comes along, go for it. After all, it may not be available six months from now. As long as you remain in the house, any further drop in prices will be offset by once again rising prices sometime down the road. "In all likelihood, you'll make money in the long run. So your best deal could be right now." -- Bernie Markstein, senior economist, National Association of Home Builders, "Clues About When Real Estate Prices are Ready to Rebound," by Lew Sichelman, San Francisco Chronicle, Oct. 7, 2007

"It's the best time (to get into real estate). You can make great deals today that you couldn't make a year ago or two years ago." -- Donald Trump, "CNBC with Erin Burnett (video clip)," Oct. 15, 2007

Economist's Advice to His Family Members about Selling Their Home Now: Don't say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That's just painful -- and expensive. Mayer's research offers a simple lesson for everyone out there waiting for a high price to push them back into the black: Get real. -- Professor Christopher Mayer, Director of the Paul Milstein Center for Real Estate, Columbia Business School , A Reality Check For Home Sellers, New York Times, Economic View, Sept. 23, 2007.

What To Tell Reluctant Home Buyers Based on Interest Rate Cut The cuts reduced the target federal funding rate by a half-point, from 5.25 to 4.75 percent -- the first time in four years for a cut of that size. Tell your buyers:

1.Interest rates may not come down at the right time for you.

2.Interest rates are at near-historical lows now. The only thing that will make them go lower is a recession and nobody wants that.

3.Interest rates may not get low enough for you to buy the home you want. If you want to buy, you should buy in a range that you can get with a fixed-rate loan, unless you know you are going to sell within two to five years. If you get an adjustable rate loan, pay extra on the principal with the savings you achieve on the interest rate. That's about $25 for every 1/8 of a point between the adjustable rate and the fixed rate you could have gotten.

4.There's no guarantee that the home you want will be available at the same time as the lowest interest rate is available to you.

5.Interest rates could sink to all-time lows, making you a genius. But that doesn't mean the home you want won't cost more in the meantime.

-- Something New to Tell Your Reluctant Homebuyers, Realty Times, Sept. 21