Counting on Higher Mortgage Limits? Be Patient

Homeowners are already calling their lenders about refinancing, and ads are pushing the idea that the congressional economic rescue plan offers the perfect time to get a loan.

But it could be weeks before consumers will be able to benefit from the mortgage provisions contained in the legislation approved by Congress.

The bill, known as the Economic Stimulus Act of 2008, will temporarily increase the limits on loans backed by government-sponsored mortgage financing companies known as Fannie Mae and Freddie Mac, and on Federal Housing Administration loans, to as much as $729,750. These loans typically carry lower interest rates.

The U.S. Department of Housing and Urban Development has up to 30 days from the time the bill becomes law to decide what loan limits apply in various parts of the country.

Rates for "jumbo" or non-conforming loans, those of more than $417,000, are more than a percentage point higher now than rates for conforming loans - the biggest spread in the past decade.

The stimulus plan also will allow the FHA to guarantee loans of up to $729,750.  Before the boom in subprime lending, FHA loans were the first choice of borrowers with damaged credit and little down payment.