President Bush signed the Economic Stimulus Bill into law this past Wednesday, February 13th.   Although the details are not finalized, the department of Housing and Urban Development (HUD) has 30 days to publish the median area home prices, Metropolitan Statistical Areas and mortgage principal obligation limits after the bill became law.  The new Proposed Fannie Mae and Feddie Mac conforming loans are to be based on 125% of the area median home price not to exceed $729,750.  That is great news for Orange County, for the median home price here is approximately $600,000, which means that Orange County conforming loan limit should be around the $729,000  limit.

I expect that this year will be the bottom of this severe market correction.  With the proposed buy-out of Countrywide Mortgage by Bank of America, the recent large decrease in the Fed funds rate, the new Federal program called Project Life Line that helps delay and possibly avoid Foreclosures, and  this new Economic Stimulus Bill raising loan limits,  this should put the brakes on  further price erosion here in Orange County..

The new loan limits will apply to 30 year and 15 year fixed rate, fully amortizing (sorry no interest only) and owner occupied homes only.  They should also apply to high Loan to Value (LTV) FHA loans which should really help to stimulate the local real estate market back to normal health.  Adjustable rate mortgage are being considered but but I would not  count on it. Although the bill has passed the information above is not final.  Changes are set to expire on December 31, 2008, although I would be willing to bet the this Bill is extended like many other Bills in years gone by.