FHLMC (Freddie Mac) and FNMA (Fannie Mae) buy loans from lending institutions.  At present the maximum loan that they purchase is $417,000.  California is on the path to have this amount increased to $625,000; the Senate and White House still need to approve the increase. 

Because  lending institutions can more readily sell these loans, interest rates are lower for the loans that are $417,000 or less. Presently a conforming ($417,000) 30 year fixed interest rate (0 points) is about 5.75% - loan amounts over $417,000 are priced at about 6.75% that is a hefty premium but lending institutions have fewer resources to sell these loans, especially after the sub prime fiasco.

$500,000 5.75% PI (principal and interest) = $2868
$500,000 6.75% PI = $3243

Once passed and implemented, at today's rates this increase translates to a monthly savings of $375!

This is a major step in the right direction.  Now if we can just get the writers back to work, and get our studio home buyers back on track!  This will also be a boon for homeowners seeking a refinance.

The package agreed upon by Democratic and Republican members of the House would allow government-sponsored Fannie Mae and Freddie Mac to buy mortgages at least 50 percent more expensive than the current $417,000 limit. The Senate and White House still must sign off on the proposed stimulus plan, which also includes tax rebates for Americans.