Stuck in your home?

It's an open secret. The American economy is in trouble, and President Bush acknowledged that fact by unveiling a $150 billion economic stimulus package recently. However, that package contains no provisions for raising the $417,000 conforming loan limit to allow Fannie Mae and Freddie Mac to begin purchasing so-called jumbo loans.

The main thrust of the president's plan is to try to stimulate economic growth through about $100 billion in relief tax cuts and incentives for individuals, families, and businesses. No specific mention was made about trying to revive the country’s sagging real markets or the intensely troubled mortgage lending industry. Disagreements within Congress have continued to hinder the progress of legislation that would allow Fannie Mae and Freddie Mac to be able to purchase larger loans, as well.

As far as trying to bolster the housing market, the Bush administration has concentrated its efforts on FHASecure, which a new FHA loan guarantee program that would allow some delinquent borrowers who have adjustable-rate mortgages to refinance using fixed-rate loans, and a voluntary program they can Hope Now, which encourages lenders to work with borrowers in creative ways to refinance or restructure their loans rather than moving forward with the foreclosure process. However, some critics of the plan contend that neither one of those programs will provide any real help to the nearly two million American homeowners who are facing foreclosure, especially in light of the fact that home prices are declining in many areas of the country.

The Mortgage Bankers Association recently estimated that some 384,000 loans are currently in some stage of foreclosure, although many of those loans don’t cover owner occupied real estate. There is some good news, though. The MBA also reported that some 54,000 loans were restructured during the third quarter of 2007 and another 183,000 were modified to establish repayment plans that would allow homeowners to stay in their houses.

The real estate crunch is far from over, however. The National Association of Realtors recently suggested that any stimulus package passed by Congress needs to include an increase in the conforming loan limit for Fannie Mae and Freddie Mac if the country’s housing market is to recover any time soon. According to the NAR, simply raising the conforming loan limit to $625,000 would reduce the supply of homes on the market within a couple months, would strengthen home prices by at least two percentage points, and could increase real estate activity by more than $40 billion. The NAR also stated that raising those conforming loan limits could reduce foreclosures by as many as 210,000 in a relatively short time.

It’s yet to be determined if the Bush package will be amended to reflect those suggestions. As of this moment, there is no such wording in the plan.

Fix up the home you're living in with Seven Secrets to Glorious Home Design at Residential Design Guide