For Richer: A gift from the Beltway
By Allan Sloan, senior editor at large
High-income folks like me don’t qualify for rebate checks. But we’re getting so much more.
(Fortune Magazine) — I won’t be getting an economic-stimulus tax rebate check, but I’m not complaining about it. Not only am I fortunate to make too much money to qualify for a rebate, but I’m getting something far more valuable than the maximum $1,200 my wife and I could have gotten. Thanks to a relatively little-noticed portion of the stimulus package, we’ll be able to refinance our house more cheaply than we otherwise could, or presumably sell it for more. Let me take you through it. The stimulus package raises the maximum size of a “conforming” mortgage to $729,750 from the previous cap of $417,000. A conforming mortgage is a mortgage that can be sold to Fannie Mae (FNM) or Freddie Mac (FRE, Fortune 500), and it carries a lower interest rate than “jumbo” loans that exceed those limits. Similarly, the maximum mortgage that can be insured by the Federal Housing Administration has also risen to $729,750. For people in high-home-price areas, including mine, these maximum mortgages are now high enough to matter. Being able to borrow $417,000 on the cheap doesn’t help much when you’re hoping to sell or refinance your house for, say, $750,000. But a $729,750 limit works out just fine. This higher limit translates into cheaper refinancing or a higher sales price, because the lower interest rate means buyers can presumably afford to pay a higher price. If we assume a 5% down payment, we’re talking about houses in the $450,000 to $765,000 range becoming eligible for these loans. The range rises if people make larger down payments or put second mortgages on top of these loans. We’re talking major money here, folks. In today’s market, the interest difference between a conforming loan and a non-conforming loan for a 30-year fixed-rate mortgage is a whopping 1.27% a year, according to Keith Gumbinger, a vice president at HSH Associates, a mortgage research firm. So a $700,000 conforming loan at 6.01% would carry almost $9,000 less annual interest than a nonconforming loan (at 7.28%).
For Poorer: Unexpected child support payments
NEW YORK (CNNMoney.com) — By Catherine Clifford, CNNMoney.com staff writer
Last Updated: June 11, 2008
The government has intercepted $842 million in economic stimulus payments for 1.5 million Americans who have skipped out on child support obligations, student loans or tax bills.
The amount withheld represents about 1.5% of the more than $57 billion distributed under the stimulus program. So far, 67 million tax filers have received payments.
About 54% of the cash intercepted will be funneled to states for child support, according to Dean Balamaci, a U.S. Treasury Department official. “We are really proud of that,” he added.
Congress and the Bush administration came together earlier this year to enact a $170 billion economic stimulus package. The Treasury started distributing payments – $600 for individuals, $1,200 for couples and $300 per child – to tax filers. The goal was to juice the economy by putting money in the pockets of consumers.
One unanticipated side effect of the stimulus program is the recovery of money owed single parents and government programs that support children on welfare.
Of the stimulus cash that has been recaptured, $459 million is being sent to states to distribute for child support payments. And of that amount, $166 million is used to fund state child welfare programs and $292 million goes to custodial parents who have not qualified for welfare payments but are owed child support, according to Balamaci.
The stimulus offset effort is part of the Treasury Offset Program, which intercepts federal payments of any kind to pay debts. The entire program has collected $4.6 billion so far this fiscal year.
Generally, the offset program captures money owed by people who are found formally delinquent on tax or child support payments. Tax filers on scheduled pay plans with the government are not affected by the program.
