Is the Speaker of the House from a High Cost Housing Market?
In addition to the stimulus checks that received a great deal of attention, the economic stimulus package proposed last week by President Bush and House leaders contains a provision to allow Freddie Mac and Fannie Mae for one year to purchase home loans up to $729,000 in high-priced housing markets. Currently, the limit for so-called conforming loans is $417,000. Because the alternative “jumbo” loans tend to cost about ¾ of a point more than conforming loans, this change has significant implications in areas in which the average home loan is non-conforming.
For example, according to Money Magazine, the average home price in San Francisco—the home of House Speaker Nancy Pelosi— is $656,000. Thus, if the stimulus package were to be enacted into law, a San Francisco homeowner with a mortgage equal to the value of the average home could refinance and save $410 a month on their mortgage. Calculate this over a 30-year mortgage, and we are talking about a golden state.
If you don’t think elections have consequences, the average home price in Dixon, Illinois—in the district of the previous House speaker, Dennis Hastert— is $107,000.
Comments
Very interesting. Good for some people I guess.
Posted by: Mortgage Maniac | January 28, 2008 10:29 AM
I'm confused. Wasn't Speaker Hastert interested in real estate investing too?
Posted by: Eric L. | January 28, 2008 12:32 PM
A lot of homeowners in the Bay Area have creative financing. Some are subprime vehicles with silly amounts of risk (balloon loans) and some are legitimate ways to get around stuff like the jumbo cutoff. When my partner and I wanted to buy a one bedroom house in Silicon Valley (a very nice 1BD I grant you) we ended up with 2 separate loans, a mortgage on a fixed rate, and a home-equity line of credit that floats. There was no way to finance all our debt with a mortgage, despite the fact that we are both tenured teachers with master's degrees in wealthy school districts (i.e. we have jobs for life unless we commit a crime and we could have afforded a higher, single payment had it been available to us. Needless to say, if Pelosi's measure passes, we will be able to refinance the line of credit out of existence and have substantially less exposure to interest rate fluctuations going forward. Yay! This seems to be in line with the idea of helping homeowners who can make regular payments on schedule stabilize their risks without bailing out the whole farm. Now that there are so many houses on the market that banks couldn't quickly sell a foreclosed property for its booked value, this sort of thing makes it easier for lenders to avoid more losses, just by raising the jumbo cap above what the lowest priced properties are. $417K might buy a small fixer-upper in the ghetto if you had some money to put down, too. 729,000 is a nice high number, probably higher than it needs to be, but since we aren't getting a rebate check we'll take it. It might even be a little stimulus! All told, **Go Nancy go!**
Posted by: ScottS | January 28, 2008 07:30 PM