Sam: That might not be as bad as it seems, provided the rules for lending in general are tightened up. Raising the limit for conforming loans makes sense for us out in CA, where pretty much every loan is non-conforming. As long as the person puts down sufficient down payment, and actually has the income to make the loan payments (and the loan doesn’t mushroom 5 years down the road), then raising this limit should help rather than hurt.
I haven’t read through the entire thread, but doesn’t anyone else find it militantly unsurprising that the Senate looks poised to shoot this whole thing right in the…foot? They want to tack on a bunch of (partisan) crap from both sides (Republicans want to tack on stuff just as much as Democrats do from what I’m reading).
It’s amusing…in a sad sort of way. We’ll probably get our trusty rusty ‘Economic Stimulus Package’ in the end…months late and billions of dollars more than the silly first swipe at this thing would have cost. But everyone will get his or her pork…and really, isn’t that what this is all about?
Wonder what the final price tag will be? I’m guessing more than the $140 odd billion it was originally supposed to be…
ETA: For anyone not following along here is an article on CNN about it.
-XT
I may be wrong, and I’m sure someone will correct me if I am, but the documentation for FHA/VA loans is very strict (to the point of being overbearing, according to some realtors I’ve spoken to recently). In other words, as John Mace points out, this essentially forces the lender to do the due diligence and meet certain guidelines (which is at least part of the reason that a “subprime mess” exists to begin with).
The credit crunch is not a result of the banks not having money. Do you think they’ve burned it, or something? The losses are writing off loans already made. Banks that have liquidity issues are getting money from overseas, but there are only a few with that problem. Much of the credit crunch comes from uncertainty in the markets. You tend not to make more loans if the portfolio you have is uncertain.
The stimulus packages addresses the upcoming recession, not the credit crunch, which is why it is hot now and not a few months back when the crunch happened.
It’s bipartisan, so it is not going to be very effective in buying votes. Whether it is big enough and fast enough is open to question, but putting money into people’s hands who consume will either allow manufacturers to expand or at least not contract, which will ease unemployment, which will keep money in the hands of consumers, and so on. The problems in the past are from the stimulus being too slow. The House worked very quickly this time, but I agree with xtisme that the Senate should get out of the way and try to add stuff later.
Agreed. For housing markets like ours, it really doesn’t make sense to have a cap below the average market price. As I understand it, the reason for the $417k limit on conforming loans is because banks were likely to have a harder time unloading large luxury homes compared with normal single-family dwellings. This is not an issue when even the tiniest house in a 30 mile radius costs more than $417k. It will also make for a much softer landing for housing markets in these areas, as buyers with good incomes and credit are able to get affordable rates to soak up some of the excess supply.
As long as banks actually lend to people who can afford to pay their mortgage, I don’t see how raising the limit can do anything but help.
At first glance, I honestly thought I read:
** Congress finally get it right - Erotic Stimulus Package**
At which point I thought, “You’re damn right they finally got it right!”
…I was sorely disappointed when I re-read it. 
It’s already 1/3 pork, at Bush’s insistence - some depreciation credit speedup, or some such, that will cost $50B of the total bill, and isn’t expected to be particularly useful as stimulus.
The Senate wants to extend unemployment benefits, which are generally regarded as one of the best countercyclical stimuli available, another being boosting food stamps.