Congress today approved a $790 billion economic stimulus bill that includes a modest expansion of a first-time homebuyer tax credit and restores to $729,750 the upper loan limit in high-cost areas for Fannie Mae, Freddie Mac and FHA loan guarantee programs.
Voting along party lines — no House Republicans supported the bill, and only three voted for Senate passage — lawmakers are approved nearly $1 trillion in new spending and tax cuts championed by the Obama administration as needed to save or create 3 million to 4 million jobs.
The vote in the House was 246-183, with seven Democrats voting no, while the 60 votes needed to clear procedural hurdles in the Senate came with the support of Republicans Arlen Specter of Pennsylvania and Olympia Snowe and Susan Collins of Maine.
Democrat Sherrod Brown cast the deciding vote to make the bill law when he returned from a trip to Ohio Friday evening. Brown had returned to his home state where his mother died this week.
Obama was expected to sign HR 1, the American Recovery and Reinvestment Act of 2009, as soon as it reaches his desk.
Real estate, home builder and mortgage-lending trade groups were hoping for more incentives to jump-start homebuying — such as a $15,000 tax credit for all homebuyers, approved by the Senate in an earlier version of the bill (see story).
The compromise bill increases the $7,500 limit on an existing tax credit for first-time homebuyers to $8,000, extends its sunset from July 1 to Dec. 1, and eliminates a requirement to repay the credit (unless a home is resold within three years).
The loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs, which were bumped back down to $625,500 in high-cost areas on Jan. 1, were restored to the temporary $729,750 approved by Congress a year ago in the Economic Stimulus Act of 2008.
Fannie and Freddie’s conforming loan limits — which began 2008 at $417,000 — were allowed to stretch to 125 percent of the median home price in high-priced housing markets for much of last year. That was intended to be a temporary measure to address the high cost of non-conforming "jumbo" loans after the collapse of the private-label secondary mortgage market in August 2007.
The $729,750 limit expired on Jan. 1, and Fannie, Freddie and FHA are currently permitted to guarantee loans of up to 115 percent of the median home price in high-cost markets, with a cap of $625,500 (that’s 150 percent of the $417,000 conforming loan limit). HR 1 will restore the limit to 125 percent of median home price in high cost markets, up to $729,750, for the remainder of 2009.
FHA began 2008 with a $200,160 "floor" loan limit in normal markets and a maximum loan limit of $362,790 in high-cost markets. As part of the Economic Stimulus Act, Congress increased FHA’s floor limit to $271,050 in normal markets and the upper limit in high cost areas to $729,750. That move helped increase the Federal Housing Administration’s share of purchase mortgage originations from less than 4 percent in 2006 to 21 percent in September.
The compromise bill also provides $200 million for the U.S. Department of Agriculture’s Rural Housing Insurance Fund. Although that funding will support $11.5 billion in single-family housing loans, it’s less than half the $500 million proposed in the earlier House version of the bill.
The USDA Rural Housing Service provides loan guarantees and a smaller number of direct loans with down payments as low as zero percent to homeowners in rural areas who do not exceed the program’s income requirements.
In negotiations between House and Senate leaders, the $5.2 billion the House had earmarked for community development block grants and a neighborhood stabilization program was also slashed to $3 billion. Of that, $2 billion is earmarked for the neighborhood stabilization program, which helps states, local governments, and nonprofits purchase and rehabilitate foreclosed, vacant properties.
The bill will also allocate $1.5 billion for a homelessness prevention fund that will provide short-term rental assistance, housing relocation, and services for families who may become homeless due to the economic crisis.
While the stimulus bill may have fallen short of the expectations of some housing industry groups, the Obama administration is promising more foreclosure-prevention efforts as part of an ongoing financial stability plan for banks. The White House announced today that it will provide more details next week about a comprehensive housing plan to help borrowers avoid foreclosure.
Treasury Secretary Timothy Geithner this week said the program will provide $50 billion for foreclosure prevention from the $700 billion Troubled Asset Relief Program (TARP), and left open the possibility of expanding an existing $600 billion Federal Reserve program to drive down mortgage rates through the purchase of mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae (see story).
The White House said President Obama will discuss the administration’s housing plan at a speech Wednesday in Phoenix.
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