H.R. 5140

GOOD NEWS!!! And Some Bad News...Updates from our friends at: Island Home Capital

Interest Rate relief for Hawaii Real Estate Investors!!
H.R. 5140: Economic Stimulus Act of 2008 is a bill that was sponsored by Rep. Nancy Pelosi (CA-8) to provide economic stimulus through recovery rebates to individuals, incentives for business investment, and an increase in conforming and FHA loan limits.
This economic stimulus package was signed into law by the President on February 13, 2007. This new law includes a temporary increase in both the FHA and conforming loan limits to as high as $729,750 in high cost areas, which includes Hawaii (The formula that is used to calculate the conforming loan limit for any specific area is 125% of the Median Home Price as published by the Secretary of Housing and Urban Development (HUD) with a cap of $729,750.
As a result of the change in conforming loan limits, interest rates on many mortgages in Hawaii will go down because loans between the previous conforming loan limit in Hawaii of $625,500 and the new limit of $729,750 are now eligible to be purchased by Fannie Mae and Freddie Mac or insured by the Federal Housing Administration. There is some confusion because the bill has a provision that says the higher limits are only effective for loans originated between July 1, 2007 and December 31, 2008. In short, the reason it is effective beginning July 1, 2007, is because the credit crisis started to unfold in July and August of 2007. Mortgage market conditions rapidly deteriorated almost overnight. Many secondary market investors suddenly refused to purchase loans that couldn't be sold to Fannie Mae and Freddie Mac.
Unfortunately, many mortgage banks had already funded these loans in their own portfolio or through their warehouse lines of credit. Their intention was obviously to sell these loans on the secondary market after the loans were funded. However, the credit crisis prevented them from doing so, and they were stuck holding these loans in their portfolio. The July 1, 2007 date in the bill is designed to allow these lenders to unload these mortgages and sell them on the secondary market to Fannie Mae and Freddie Mac. New loan transactions, whether purchases or refinances, will be subject to the new limits set forth in the bill.

The other date included in the bill of December 31, 2008 means that the old limits will go back into effect after this year.

Information From Island Home capital weekly update.
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www.islandhomecapital.com/