Nineteen metropolitan areas are likely to notice a direct impact from an increase in conforming loan limits included in the proposed economic stimulus plan, according to a Washington-based policy research firm.

Seven of those areas are in California, six are in the greater New York area and two are in Massachusetts, according to Stanford Group Co. Others are in the greater Washington area, Boulder, Colo., the greater Miami area and the Seattle-Tacoma region.

The proposal, discussed by House Financial Services Committee Chairman Barney Frank (D-Mass.) this week, permits Fannie Mae and Freddie Mac to securitize mortgages up to 125% of the local median home price, according to the research firm. The limit is capped at $729,750.

But the limit won’t dip lower than $417,000, the existing loan limit, even in less-expensive housing markets where 125% of the median home price is lower than that amount, according to Stanford’s interpretation of the proposal. The temporary loan limits would expire on Dec. 31, 2008, the group reported.

That said, there is still some confusion about the details of this proposal, the research firm said.

“It is clear that this deal was thrown together quickly. This led to different versions of the GSE plan being included in various press releases and press conferences that lawmakers gave throughout the day,” according to Stanford. For the firm’s purposes, they used the version being discussed by Frank, though “no one will know for certain how this will work until lawmakers release legislative language,” the firm said, and that could come in several days.

Even though fewer than 20 areas could see a direct impact from this reform, the effects could ripple throughout the country, Stanford said.

“These are mostly very large markets and many are in states with some of the biggest mortgage problems. As a result, we believe this plan will help reduce the spread between jumbo and conforming loans and make it easier for those in jumbo loans to refinance into other jumbo loans,” the report said.

Read more about how the mortgage industry reacted to the loan-limit provisions of the stimulus proposal in this week’s Real Estate pages. Also take a look at why mortgage interest rates hit four-year lows this week, and how existing-home sales fell 2.2% in December, capping off a dismal year for housing.

Those in the real estate and mortgage industries have for months been calling for a change to the conforming loan limit, especially after jumbo loans started to get a lot more expensive in the summer. Soon, we may see how much this change will actually help.

Fed cuts give strapped homeowners some breathing room

 Homeowners facing resets on their adjustable-rate mortgages or hoping to refinance into less-burdensome loans may be the biggest beneficiaries of the Federal Reserve’s surprise rate cut this week as mortgages continue to get cheaper.

Existing-home sales fall 2.2% to 4.89 million pace

Resales of U.S. homes fell 2.2% in December to a seasonally adjusted annual rate of 4.89 million, the lowest in nine years, the National Association of Realtors reported Thursday. Resales are down 22% compared with the previous December and are down 32% from the peak two years ago.

Fixed-rate mortgages at lowest in almost four years

Mortgage rates for fixed-rate loans sank to their lowest levels in nearly four years, pushed downward by further evidence of weakness in the housing market and by an emergency rate cut from the Federal Reserve, Freddie Mac’s chief economist said on Thursday.

Paying mortgage at all costs can still be costly

We are not in foreclosure, but due to a job change, we have been getting behind in credit-card payments. We will always pay the mortgage first. Now the interest is outrageous and causing payments to be even more out of reach. What should we do? Are those debt-reduction companies any good? Should we try to refinance to pay unsecured debt with secured collateral? Believe me we will never go back there if we can ever get out from under this!