As part of the economic stimulus package negotiated between the administration and the House, the House today passed higher GSE and FHA loan limits. The provision raises the loan limits for FHA, Fannie and Freddie to 729,500 until Dec, 31 2008. The limits are to be set based on 125% of local median house price as determined by the Secretary of HUD within 30 days. Since HUD just established the 2008 FHA limits, we expect that the new limits could go into effect rapidly after final passage by the Senate and signed by the President.



Our data suggests that over 40 markets will see substantial increases in FHA eligibility. The FHA provision raises not only the ceiling but the floor, resulting in a fairly wide impact. With regards to the GSE increase, fewer markets will benefit directly, but a Morgan Stanley report issued today indicated that overall 58 billion in new non agency debt will become eligible for agency purchase, assisting over 280,000 homeowners and creating a 77bps savings.



We will have more data to share soon.



Next steps: The House has passed the increases. The Senate is expected to act next week. However, the Senate is looking to take a different approach to stimulus than the House so there may be a longer negotiation period. At this point, both the GSE and FHA limits look like they will be included in the Senate version.



We will continue to monitor closely.





Gary N. Lau

WestAmerica Mortgage Company