Since the news on February 13 that the President signed into law the Economic Stimulus Act of 2008 which included a "temporary" increase in the conforming loan limits of Fannie and Freddie everyone has hoped that it would be a major boost to the Real Estate market.  So far it seems to be the big disappointment that I expected.

I have spoken to 5 wholesale representatives of major lenders and they say volume is not there.  The main reason is that rates start around 7.25% and nobody is buying.  Most of the loans that were originated with the old Wall Street programs were priced just around .25 to .375 above the conforming loan programs.  Based on todays market that should give you a jumbo loan rate of about 6 to 6.25% as of 4/17/08.  Currently the difference in rates between a conforming loan and a Jumbo loan are over one full percent or more.  Who wants to buy in this market when the rate is high and prices are dropping.  

I think that they need to bring back stated programs for the self employed at a rate that is only .25 to .375 above the conforming rate.  Keep the stringent credit score requirements and lower the down payment required to around 10%.  Most lenders now require 20% for stated income loans and this creates a hardship on the most buyers in todays market with the prices of homes were they are.  I am not saying that they should go back to the way things were but the new model is not going to work.  What is more likely to happen based on the current programs available to consumers in the higher price range is that they will just sit out and wait till the market drops some more.   This will eventually lead to the Economic Stimulus Act of 2008 being nothing more that a paper weight on the "desk" of our economy.   The word "temporary" will definitely have been appropriate.