Senator Boxer Urges Colleagues to Raise Loan Limits for Federally-Backed Mortgages in Economic Stimulus Package

Opportunity comes at a critical time for California, which is facing the second highest foreclosure rate nationwide

January 24, 2008 -- Washington, D.C. – U.S. Senator Barbara Boxer (D-CA) today wrote to the Chairmen of the Senate Banking and the House Financial Services Committees to lay out the critical importance of raising the loan limits to $750,000 for federally-backed mortgages in the upcoming economic stimulus package.

Boxer noted that the current loan limits of $417,000 for mortgages backed by Fannie Mae and Freddie Mac exclude many homeowners in California, which has a statewide median home price of over $530,000. The National Association of Realtors estimates that raising the loan limits would result in fewer foreclosures, tens of billions in increased economic activity, and more than 350,000 additional home sales.

Boxer said, “The economic stimulus package provides us with a critical opportunity to raise these loan limits and actually help our families lower their monthly mortgage payments and even save their homes from foreclosure. We have to remember that the real-estate market is not consistent across the country– taking this responsible step would give thousands of California homeowners access to lower interest rates so that they could refinance their homes.”

With the loan limits raised to $750,000, many borrowers who have or are seeking higher interest jumbo loans will now qualify for the lower interest rates of conforming loans. Conforming loan rates can be as much as a percentage point lower than jumbo rates. For a homeowner who refinances from a jumbo into a 30-year fixed mortgage of $550,000, that would translate to a monthly savings of $353. A homeowner with a 30-year fixed mortgage of $650,000, could save $417 a month. And a homeowner with a 30-year fixed mortgage of $750,000, could save $483 a month. And for homeowners who are able to refinance out of subprime loans, the savings could be even greater.

The full text of Boxer’s letter to the Committee Chairmen follows:

January 24, 2008

Honorable Chris Dodd
Chairman
Senate Banking Committee

Honorable Barney Frank
Chairman
House Financial Services Committee

Dear Chairman Dodd and Chairman Frank:

I was pleased to have the opportunity to discuss with you the critical importance to California of raising the loan limits to $750,000 for federally-backed mortgages in the proposed economic stimulus package.

As you are aware, the current loan limits of $417,000 for mortgages backed by Fannie Mae and Freddie Mac exclude many homeowners in areas of the country with high-cost real estate markets. In California last year, the entire state had a median home price of over $530,000 and some urban areas in the state have median home prices of over $800,000.

This opportunity to raise the loan limits comes at a crucial time for many families in California, which is currently experiencing one of the highest rates of home foreclosures in the country. Taking this action now would help those who want to affordably refinance their mortgages and save their homes.

The security and affordability provided by Fannie Mae and Freddie Mac should not be limited only to those areas of the U.S. with lower housing prices. The dream of home ownership exists in every corner of this country and increasing the loan limits for federally-backed mortgages will help hardworking American families all across the country.

I pledge to do all that I can in the Senate debate on the economic stimulus package to make the case for this important measure that will help so many of my constituents and others across the country.

Sincerely,

Barbara Boxer

U.S. Senator

Source: Senator Barbara Boxer

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