NEW YORK >> The two largest U.S. sources of housing finance are increasing the size of home loans they can buy from mortgage lenders in a move that could marginally encourage consumer spending and support an anemic economy.
Housing agencies raise
home loan limits
Mortgages in Hawaii are
eligible up to $484,500
Star-Bulletin staff and wire
Home funding agencies Freddie Mac and Fannie Mae said yesterday they would increase the maximum dollar amount for Hawaii mortgages they can finance to $484,500 for 2003. The loan limit for second mortgages will increase to $242,025, while limits on two-family homes rises to $413,100, to $499,300 for three-family homes and to $620,500 for four-family homes.
The median price of a single-family home on Oahu was $355,000 in October.
For most of the rest of the country, the limits increase to $322,700 from $300,700, effective Jan. 1, 2003. The limits are higher in Hawaii, Alaska and the U.S. Virgin Islands.
The 7.3 percent loan limit increase "enables more families to benefit from a lower (interest) rate," said Frank Nothaft, chief economist at Freddie Mac.
He estimates that as many as 250,000 loans could benefit from the higher loan limit, including 100,000 existing loans that could be refinanced at lower rates. Those loans could then be purchased by Freddie Mac, Fannie Mae or any other lender offering conventional mortgages.
Home loans that the agencies can purchase, known as conforming, or conventional loans, carry a lower interest rate than loans that exceed the sizing limit. Those loans are known as jumbo, or nonconforming, loans, and carry higher interest rates.
More homeowners will be encouraged to refinance because the higher loan limit means they can save on monthly borrowing costs by shifting into mortgages guaranteed by the two housing agencies. The money saved by refinancing, which could total $250 or more a month, according to Nothaft, could be spent on goods and services, buttressing the wobbly U.S. economy.
"That's a pretty big economic stimulus," said Nothaft.
The increase in the loan limit could also prolong the housing industry's hectic pace in new and existing home sales, as well as construction. Housing has been a major support for the struggling economy.
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