by Amy Lillard
(March 6, 2008) In one of the states hit the worst by the subprime debacle and housing market nosedive, some federal help is on the way.
The Department of Housing and Urban Development raised the mortgage loan limits for 14 California counties this week, boosting the size of loans guaranteed by the Federal Housing Administration. The maximum limit, previously $362,790, is now set at $729,750.
California is one state that's been desperately in need of this type of help. In the 14 counties selected by HUD, median home prices far exceed the previous limits for FHA guarantee. In fact, nearly half of all jumbo loans are extended in California. Home foreclosures in southern California climbed 433 percent in January from a year earlier.
This increase is part of the much-discussed economic stimulus package levied by the federal government. The package offers this increase as a temporary measure to let more homeowners hit from high-rate subprime mortgages refinance into federally insured loans. The package also includes a temporary increase in the limits imposed by government-sponsored companies Fannie Mae and Freddie Mac (previously set at $417,000). By involving Fannie Mae and Freddie Mac, the hope is that investors will demand securities made up of jumbo loans, driving interest rates lower and sparking home market activity.
The increased limits expire at the end of this year. California Governor Arnold Schwarzenegger is pushing Congress to make the increased limits permanent.
The 14 California counties covered by this increase are: Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz and Ventura. HUD claims the new limits will make FHA-backed loans available to 30,000 Californians.
Other counties nationwide are expected to receive the same lift in loans limits over the next few days. When the limits are rolled out to these additional counties, HUD estimates nearly half a million homeowners will have access to FHA-backed loans.