The $825 billion economic stimulus package drafted by House Democratic leaders will restore the $729,750 GSE loan limit in high cost areas until year-end 2009.

The package also includes a provision that increases the loan limit on Federal Housing Administration (FHA)-insured reverse mortgages to $625,500 from $417,000 nationwide.

Congress originally raised the maximum loan limit on Fannie Mae, Freddie Mac and FHA loans to $729,750 in February 2008 as part of the first stimulus bill.

But that provision expired Dec. 31 and the loan limit adjusted downward to $625,500 where it stands today. In addition to raising the maximum loan limit, the House bill expands the definition of high cost areas by allowing regulators to designate wealthy residential communities as "sub-areas" within a metropolitan statistical area.

If the maximum loan limit in an MSA is $650,000, for example, the loan limit in the sub-area could be $729,750.

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