What do people think about rates going up or down if the conforming limit is raised to $725k?

I think rates could go up if a new refi boom occurs because of the new conforming limits...

What do you think?

Congress, White House Complete
Deal on Economic Stimulus Package
Plan Includes Tax Rebates, New Limits
On Fannie, Freddie Conforming Loans
By SARAH LUECK
January 24, 2008 1:59 p.m.

WASHINGTON -- Democratic and Republican congressional leaders completed a deal Thursday with the White House on an economic stimulus package that would give most tax filers refunds of $600 to $1,200. The plan also boosts the cap on Fannie Mae and Freddie Mac conforming loan limits.


House Speaker Nancy Pelosi and Republican leader John Boehner unveiled the $150 billion package, hammered out in a week of intense negotiations with Treasury Secretary Henry Paulson.

Ms. Pelosi said Congress would act "at the earliest date, so that those rebate checks will be in the mail." The rebates will go to 117 million families, according to a Democratic summary. Republicans, for their part, were pleased that the bulk of the rebates -- more than 70%, according to an analysis by Congress' Joint Tax Committee -- would go to individuals who pay taxes.

"We are pleased that the negotiators have been able to reach an agreement on an economic growth package," White House press secretary Dana Perino said Thursday afternoon. She said President Bush would make a statement about the deal later in the day.

Senate Majority Leader Harry Reid said the goal is to send the package to the White House by Feb. 15 for Mr. Bush's signature.

Under the plan, individuals who pay income taxes would get up to $600, working couples $1,200 and those couples with children an additional $300 per child under the deal. Workers who make at least $3,000 but don't pay taxes would get $300 rebates. The rebates would be limited to individuals whose income is $75,000 or less and working couples with incomes $150,000 or less.

Businesses will get more generous tax breaks for equipment investment, and small firms will get greater leeway to write off their expenses, under the agreement. Companies facing net operating losses this year would get to apply them to previous year's tax bills to get a refund.

INSIDE THE DEAL


-Tax rebates: Checks of at least $300 for almost everyone earning a paycheck, including low-income earners who make too little to pay income taxes, so long as they earned at least $3,000 in 2007. Families with children would receive an additional $300 per child, while those paying income taxes could receive higher rebates. The full rebate would be limited to individuals earning $75,000 or less and couples with incomes of $150,000 or less, but a partial rebate would go to individuals earning up to $87,000 and couples earning up to $174,000.
-Business tax write-offs: Spurring business investments with so-called bonus depreciation and more generous expensing rules.
-Housing rescue: Raising the limit on Federal Housing Administration loans from $362,000 to $725,000. Boosting the cap on loans that Fannie Mae and Freddie Mac can buy from $417,000 to $725,000.The package also raises the conforming loan limits for Fannie Mae and Freddie Mac, beyond the current $417,000, which would allow the government-sponsored companies to buy bigger loans in areas with high housing costs. Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said the new limit would be 125% of a metropolitan area's median housing price, up to a cap of about $725,000.

Labor unions and advocates for the poor who had pressed for more generous unemployment insurance and food-stamp benefits in the package were disappointed those items have been dropped. "If we reject those in favor of business tax cuts, I'm not sure what the point is," said Bill Samuel, legislative director of the AFL-CIO. "It seems like this whole process is being hijacked by business interests."

The rebate part of the plan would cost about $100 billion. The package also includes close to $50 billion in business tax cuts, according to congressional aides.

The rebates would phase out gradually for individuals whose income exceeds $75,000 and couples with incomes above $150,000, Congressional aides said. Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps rise higher for individuals and couples with children.

Sen. Max Baucus of Montana, who chairs the Senate tax committee, raised concerns about the lack of unemployment benefits in the deal. "I believe that is a mistake. And I hope that we can improve on that when we consider the bill here in the Senate," Mr. Baucus said at a hearing Thursday morning. He said he would consider economic-stimulus legislation in his committee next week.

Democrats were eager to demonstrate an accomplishment on the top issue of this election year -- the economy. Those who support the tentative agreement said they were successful in moving Republicans away from tax rebates geared toward higher-income people and made more than 20 million additional people eligible for rebates, compared to the Bush administration's initial proposal. Bush administration officials had floated a plan to provide $800 rebates to all people who pay income taxes, with no limit on how wealthy they might be.

"I'm really proud we got a middle class tax cut," said Rep. Rahm Emanuel of Illinois, the Democratic Caucus Chair. "It wasn't what the Republicans wanted to do, and we made them do it."

The only practical long-term solution to our economic problems is to get out of Iraq NOW. Unless when stem the flood of money disappearing in those desert sands of the Middle East, there is no stimulus package than can help. By ending this occupation, the money can be used to rebuild our crumbling infrastructure, be used to develop new green technologies, and create jobs and industry at home.

This is actually a very good thing. I'm in the business and have been doing mortgages for a long time. I'm not just saying this because of the business. People like me are doing a great business through all the turmoil. This is no different than when interest rates were 16%+ in the 80's and no different than the liquidity crunch of the 90's. The move upward in the conforming limit would mean many troubled homeowners could refinance at lower rates. Many can buy now that wouldn't be able to buy otherwise and I'm speaking of responsible wage earners. They will still have to qualify for the loan in terms of income, assets, and credit. California and other states are far behind the standard in terms of the conforming limit. Hawaii and Alaska have higher conforming limits. Other high cost states should have the same. $625,000 would still not be enough for some people in New York or California to purchase under first time buyer type programs.

I'm always willing to discuss and offer my services to anyone who wants an educated loan adviser. My information is below. Rest assured that raising the conforming is a good thing. One note, they are also saying that it will only be temporary.

Sincerely,

Anthony L. Jones Jr. (T.J.)
Loan Officer, MBA
Indymac Bank
4000 Executive Parkway, Suite #400
San Ramon, CA 94583
(877) 606-3484 Opt. #7 Ext. #3835 (Toll Free)
(925) 543-3835 (Desk)
(925) 852-1533 (Cell)
(626) 432-9022 (Fax)
TJ.Jones@IMB.com
www.TJJones.IMBHomeLending.com

Economic Malady – Stimulus Insufficient

The underlying problem with the economy is an extreme maldistribution of income between the working class and the capital owners. When a CEO can make 300 million dollars while an average worker's wages haven't even kept pace with inflation what results is a dysfunctional market economy starved for consumption spending. The average American has had to fuel his/her spending with debt obtained by borrowing on the equity within their home - that phantom equity has now evaporated.

In order to correct this out of balance condition there needs to be laws in place (similar to the anti-Trust legislation) that caps the annual income of all capital owners and their surrogates (CEOs, CFOs, etc.) at a specific federal percentage above that of the highest paid worker within their respective firm. Also, we need to eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.

Essentially, FDR was accurate when he characterized the Great Depression as an out-of-balance Economic malady. Rural income prior to the Great Depression was significantly lower than urban income, now (overvalued home equity) as then there was unlimited amounts of overvalued phantom equity flowing into the stock market, the income differential between labor and capital while nowhere near the current astronomical level was still much higher than sustainable. There in lies the root cause of the out-of-balance condition that precipitated the Great Depression. Any system including the market economy that gets to far out balance does not function properly. Certain constraints need to exist to keep the market economy from slipping into a dysfunctional state. Balance is the essence of stability nothing short of this will guarantee permanence.

John Maynard Keynes –
 If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes its effects in increasing the propensity to consume is, of course, all the greater.
Aggregate consumption depends mainly on the amount of aggregate income.
Consumption – to repeat the obvious is the sole end and object of all economic activity.
 We cannot, as a community, provide for future consumption by financial expediants [stocks, bonds, 2nd mortgages on home loans, etc] but only by current output.
Capital is not a self-subsistent entity existing apart from consumption.
Consumption is directly tied to the level of employment.

My Proposed Program
• 2 year 800 billion emergency Infrastructure Investment Jobs Creation Program (IIJCP) aimed at building new interstate highways, mass transit systems, schools, bridges, public hospitals, libraries, and assorted public buildings.
• Eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.
• Taxation of corporate profits in the amount of 95% for firms that exceed a threshold level of jobs outsourced to a foreign country.
• Taxation at the rate of 80% on individual yearly income received from any corporation, not-for-profit organization, or any form of legal entity where the total income exceeds the U.S. average yearly median individual income by 200%.
• Fair trade agreements that ensure nations will offer decent wages, humane working conditions, and sound environmental policies.
• A nationalized health care system for all U.S. citizens.
• An effective federally funded tuition assistance program for U.S. citizens targeted at professions in demand.
• Repeal all legislation that inhibits the right’s of individuals to organize under labor unions regardless of position or any other currently disqualifying classification.

My Observations:
• An economy can only function when a large proportion of the populace is engaged in the economy thus able to purchase what is produced.
• If price is inelastic and labor remuneration static demand will fall due to reductions by industries in their capital base (the most important being labor).
• Firms forced to compete (those that are not oligopolies) in an economic environment where demand is declining will still compete on price but efficiency gains and operating cost reductions by nature have marginal declining utility whereby a point is reached when the firm's factors of production (land, labor, or capital) must be slashed. These cuts in factors of production will have a multiplicative effect throughout an economy resulting in an ever building 'wave' of economic decline.
• It is important to keep in mind that an economy cannot continue to grow when long-term consumption continues to decline. This in turn ties directly to reductions in the factors of production to accommodate continual long-term reductions in consumption.
• When geographical barriers, constraints to the free flow of labor resources, underemployed resource utilization, similar knowledge distribution across all nation state’s, and nation state governmental inconsistency exists no global free market can exist and thereby at the nation state level no significant corresponding opportunity cost for engaging in one form of economic endeavor over another.