Larger loans may soon become cheaper and easier to get in Orange County, giving its struggling housing market a boost.
Government sponsored loan buyers such as Fannie Mae and Freddie Mac can now buy loans up to the new conforming limit of $729,750, a 75% increase from the old limit of $417,000, said the Department of Housing and Urban Development on Thursday. HUD announced the new limit today, one day after saying the Federal Housing Administration can now insure loans up to $729,750.
The limit increase is good from now until the end of the year. To see limits in your area visit HUD’s special site by CLICKING HERE.
I made up a short Q&A with two key questions:
Q. Does this mean lower mortgage rates on loans above the old limit $417,000 and up to the new limit $729,750?
A. Maybe. Rates on jumbo loans, which are above the conforming limit, have generally been a percentage point higher than conforming rates since the credit crunch hit in August 2007. But traders in mortgage-backed securities say larger loans are more likely to be refinanced when interest rates fall, so they don’t want to see larger loans mixed in with loans up to $417,000. Brad German, a spokesman for Freddie Mac said loans above $417,000 will be separately turned into securities and sold to investors. Experts say such separate treatment could mitigate the benefit of having Freddie or Fannie back the loans and so interest rates to consumer won’t fall by very much.
On top of all that, brokers tell me even conforming rates are up these days. That’s because investors are worried about all mortgage-backed securities even those with the seal of approval from Fannie or Freddie.
“Mortgage-backed securities are just not a safe investment right now,” said Jeff Altman, a broker and partner of WestCal Mortgage Corp. in Orange.
Q. But this change should make larger loans easier to get, right?
A. Yes and no. Fannie and Freddie will not only buy new loans but will buy loans currently on the books of many lenders. That should free lenders up to make more loans. However, Fannie has already issued requirements to qualify for the larger loans, and some are pretty tough. You can see them by CLICKING HERE. Freddie Mac should issue guidelines soon.
This does nothing. You have to actually make a good income to get one of these loans. A 6.5% fixed, 30 year fully amortizing loan of 729,750 with a tax rate of 1.07% would require a monthly payment of $5,263.21. If you had no other debt, your income would have to be $11,696.02 or $140,352.27 a year. Very few people make this income. Oh, and you need a down payment of between 10 and 20 percent depending on the loan. And you need to document your income.
For those of us who meet those requirements, are NOT trying to buy a 700k house, and have the down, this actually does help. We may actually stand a chance, finally, of purchasing our first home. Just because the loan max is 729 doesn’t mean people actually have to borrow that much. This will relieve a lot of the pressure in the mid-4s and low-5s to try to meet the artificial 417k ceiling. (Yes, I know, declining market, etc. etc. For middle-class families with children who want some independence, a bit of yard for their kids, a tax break, and permission to decorate their own homes as they see fit, buying is a better option.)
Luis, actually you’d be surprised just how many people DO make this kind of money especially in Orange and LA counties. That said, I would say less than half that I have encountered over the years have no other debt. Still, for those facing higher rates or coming out of say an interest only loan into a lower rate but higher payment due to the truncated amortization schedule, this COULD be a good thing…and it sure as Hell beats the 7.625% Jumbo rate at ZERO points today…rates have SKYROCKETED all week and this will help the Jumbo market even though the rising rates brought on, by inflationary concerns will KILL the conforming market yet again…one more bullet from Bernanke’s Fed next week and this economy is toast!
When rates go up, vaules will come down even more.
Foreclosures hit all-time high
Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on
NEW YORK (CNNMoney.com) — More home owners than ever are losing the battle to make their monthly mortgage payments.
Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report’s quarterly, 36-year history.
Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.
Have anyone bother to check the guideline that FNM and FDR have for jumbo, it’s ridiculous. Since CA is labeled as severely distress/declining market, terms are actually even more strict than their posted requirements. CRAZYYYY.
I wonder what’s next ? Asking people to have 360 months reserve in their bank account ?
Check http://www.efanniemae.com for your copy.
-75% max LTV in declining markets
-5/1 arm: fully amortizing only
-5/1 arm: interest only 10 years
-NO CASH OUT REFI
-one unit only includes condos, puds, sfr
-660 min fico
-no lates allowed
-2 months pito
-45% dti
-FULL DOC only
-No DO underwriting
Now you understand why this change will mean just about… ummm, NOTHING! Just another psycho scam by the goverment to try and make the public think that now is a good time to buy again. It seems that the baby-boomers will stop at nothing to hold onto their equity, even if it means screwing their kids out of a chance to own a home at a payment that they can afford. But values are coming down and will continue to do so. It’s just starting.
A lot of Bears post negative article after negative article, as links to bubble reports dot com, and the like. Here’s a positive article from an unexpected source. Sorry, the link required a password, so I cut and pasted this recent article from Time Magazine:
“Ignore the Headlines! Except this one. Sure, housing’s in a hole. But there’s a potent case for buying now, whether it’s real estate or stocks
By Dan Kadlec February 14, 2008
Famed Money Manager Peter Lynch is perhaps best known for his timeless wisdom that you can beat the pros by focusing on stocks of companies where you either work or shop or have some other edge. But a more relevant Lynchism today is this gem: Ignore the headlines.
That’s no easy thing. How do you tune out all the chatter and ink on recession,housing, subprime woes, the credit crunch, rogue traders, insolvent bond insurers, $100 oil and nukes in Iran? It’s enough to make you sit on your thumbs and wait before making any big moves. But what, exactly, are you waiting for?
There has rarely been a moment in history when you couldn’t scare yourself into doing nothing. And yet, as Lynch observed nearly 20 years ago, “in spite of all the great and minor calamities that have occurred … all the thousands of reasons that the world might be coming to an end–owning stocks has continued to be twice as rewarding as owning bonds.”
A top reason to not buy stocks, in Lynch’s view, is if you don’t already own a home–in which case, that should be your first investment, since an owner-occupied home is nearly always profitable. Through a spokesman, Lynch reaffirmed these views to me–housing debacle and all.
Actually, I checked the requirements immediately and what you have posted is very misrepresentative.
-75% max LTV. Incorrect. Max for a fixed-rate jumbo-conforming is 90%, less 5% for declining markets. (85%)
-5/1 ARM conditions are a red herring, as no sane buyer would take those on these days. Same for Refis, etc.
- one-unit only, 660 min FICO (700 was what I read), 0×30 on housing, 2-months PITI (3 months is the usual from underwriters), 45% DTI (will any sane person finance higher than that? 30-35% is recommended), full doc, manual underwriting … in other words, a conventional loan for an SFR. This has been the standard for 30-year FRMs for as long as I can remember. I fail to see what’s so restrictive about it.
By the way, you failed to cite the biggie for most people: min 5% of the buyer’s own money for the down. But again, that’s been a standard for years.
What remains to be seen is what the interest rates will be, but they’ve got to be better than 7.625.
This is great news to Southern California real estate and will help many people. This in conjunction with the higher FHA limits are tempting for home buyers sitting on the sidelines out there. Many are going to jump into the market and this is going to prop up sales.
THEY TAKE STATED INCOME.
To those posting articles or long clips of articles, please understand the Register must respect copyright law. So just post a link or a paragraph and a link. In the future, I will have to crack down more on this. Thanks.
It is fundamentally evil to post permabull propaganda at a time like this: the real estate market is going to hell in a handbasket and is simply getting worse. How terrible to sucker some fool into buying at a time like this, using the usual appeal to emotion (oh, you can paint how you like, etc.) when the reality is that most people move within 10 years. So even if you can afford the payments, buying now will simply lock you into negative equity as this market continues to devolve over the next decade. The greed and gall of real estate agents and their ilk disgusts me.
>>How terrible to sucker some fool into buying at a time like this, using the usual appeal to emotion (oh, you can paint how you like, etc.) when the reality is that most people move within 10 years.>So even if you can afford the payments, buying now will simply lock you into negative equity as this market continues to devolve over the next decade. >The greed and gall of real estate agents and their ilk disgusts me.
Shoot, my eloquent retort was eaten because the form doesn’t like the quote delimiters I used.
Suffice it to say, I don’t like real estate agents either, but they, like lawyers, have their place in the universe. As to the rest, yes, buying is an emotional decision. So is renting. All decisions have both an emotional and an intellectual component; the key is to maintain the two in balance in order to make the best decision for that individual. Obviously, buying is a bad decision for you, as you certainly seem to have a lot of negative emotion bound up in it. But your assumptions don’t apply to everyone, and what you see as unimportant emotional considerations are genuine impacts to quality of life for other people. Yes, they’re small inconveniences, but small inconveniences piled high become large issues over time.
But then, I’m sure you’re not familiar with our situation, so of course you couldn’t comment on it specifically.
As for moving in 10 years, that may be true of many or even most people, but once we unpack I don’t plan on leaving until they carry me out. (In case you can’t tell, that’s also an emotionally-charged decision.)
I have to wonder if all these people who tout the wonders of renting have ever actually *lived* like that for 20+ years, let alone raised a family that way?
Yeah, and Mortgage Insurance is required on any loan with less than 80% LTV..Bye bye piggy….
No stated income-Full Docs required. This is 90’s underwriting. Remember that when you had to show w-2 or 3 yrs tax returns.
This will not help anyone and in fact no one is going to buy the paper in a credit crunch.
Bulls are misleading everyone who comes here. They are greedy pond scum egoists who want to take your money.
Don’t buy we are heading into a depression. The people who made it back then were the ones who could move to find the jobs.
The media, fed and treasury are deceiving the populace. Next year will be bad. If you believe these bulls you will lose a lot of money.
Don’t do it. They are only here because thier money supply is dwindling like the nation’s bank.. To zero and beyond.
They do take Stated Income ! Believe me. If not, it won’t be worth a crap as not too many people will qualify. They would be better off going with Jumbo stated income. Remember, they want you to buy now so they can suck more equity out of the average Joe’s pocket so it can be back to pay check to pay check and two weeks vacation a year and no accumulation of wealth. That way they can control people more easily. Just go opposite of what the media tells you.
Yeah, dump all my hard-earned savings into a house that is steadily losing market value? Struggle to make a huge mortgage payment while seeing no headway on equity? Why don’t you just shoot me. Gut-shoot me. Let me bleed to death. In pain. Just don’t make me buy a house in OC.
This is great for people who purchased high-end property prior to, oh maybe 2003, have equity AND were well-qualified for their super-Jumbo loan back in the day. They can take advantage of lower rates and perhaps obtain more “permanent” financing than the uber popular Interest-Only mortgages of yesteryear.
Believe it or not, there ARE quite a few folks who make COMBINED incomes necessary to refinance under the new tougher guides. And eliminating artificial-intelligence (such as Fannie’s DU or Freddie’s LP) means we get to approve loans the old-fashioned way…using LOGIC and MAKE-SENSE underwriting.
What a concept!!
With the amount of subprime and adjustable refis out there, the jumbo-conforming requirement that you MUST subordinate a current 2nd TD is pretty restrictive in light of the many combo loans that were originated in the last 4 years. It doesn’t differentiate as to whether the 2nd was purchase money or a cashout 2nd.
Actually, I think FHA will be a MUCH better option, even with MI. The rates will be much lower and payment will be even lower, because of the lower MI factor. 15 year FHA doesn’t even have MI. Cashout is an option for FHA, as well as higher LTV’s. FHA can also take lower credit scores, but both remain full doc.
Anyone else think FHA is the way to go?
Congress is now also discussing having HUD/FHA provide guaranteed refinancing for all 2+ year old mortgages that are underwater, whether or not they were originally backed by FHA or VA or whether or not they are sub-prime, giving the original note holders (who have only themselves to blame for this mess) a so-called “negative-equity certificate” that can be traded on a secondary market, but otherwise freeing the homeowner. The financial hit will most likely be shot out the back door in bond offerings to our preferred vendor nations in Asia and the Middle East.
Off topic, but I, for one, hope we wax those b4stards in Iraq and then “suspend their economic growth” for a decade by pumping their oil at 90% below wholesale 24×365 until every penny we’ve ever spent on that war and lost in the economic turbulence after 9-11 has been put back. This gives Canada and Russia enough time to pickup the slack and by 2018 we could be free of OPEC baby. There is only one presidential candidate that can make this happen.
Luis: Someone earning only $140K a year should get their head examined if they attempt to service $730K in debt on one obligation.
Talk about risk: did the Fed take into account the fact that people are human. They are allowing this kind of DTI on a wide scale, backing these loans with taxpayer $ - the risks of opening this up nationwide is great. The foreclosures that will come down the pipe for these jumbo conforming loans due to illness alone will put a burden on the taxpayers.
They have these stats - why isn’t anyone speaking up about it!!
I doubt the taxpayers will like this idea once they realized how many millions (or billions) of $$ are lost due to illnesses alone.
Somone with facts please share with us : what % of all mortgages nationwide go into foreclosure due to illness? - anyone?
Ironically, the one fact that Bulls keep tossing around which I agree with is one of the major reasons why I’m second guessing buying investment property in areas that have seen huge run-ups in pricing over the past few years, and especially in areas that have seen the use of ARMs and exotic loans to the tune of 75% or more of all purchases (OC saw over 80%).
That fact is this: rates are very low right now. They will not be forever. Rates at or above 8% are actually the norm for this nation - historically. Not a question of if - its when - and when the higher rates return, you can bet home sales volume in these high cost areas will take a huge hit. If the job outlook was more positive, then maybe I could work the numbers to justify risk - but so far, the job forecasts for the OC and many other areas are dismal. These are real forecasts from our high tech, mfg and service sectors. Summaries have been posted already here on this blog in the past and in all the local / national newspapers.
The children of this nation are going to be saddled with alot of debt. Make no bones about it. Undisputable. We’re not producing nearly as much as we’re consuming.
Keep in mind this other simple fact: almost every politician that backed this law has enough personal wealth to guarantee the quality of life of their children and their children’s children. Any responsible person would consider these facts and plan accordingly.
There is just something wrong with a person thinking that $140K annual income can service over $700K in debt on one obligation alone.
Throw in children into the mix and you have the makings of a family that earns well over the poverty level but has to pinch pennies in exactly the same way. I would bet $ that dentist visits RIGHT NOW have dropped sharply already for this area - yes? no?
Give it 6 of so years - you’ll be seeing more toothless faces and broken down cars in our county and across the nation.
Anyone actually remember the 70’s? And lived in the cities of our nation at that time? (Sorry to say, but OC was no metropolis back in the 70’s - I’m talking Chicago or NYC)
A barrel of oil is a barrel of oil.
An ounce of gold is an ounce of gold.
A dollar is just a promise by a bunch of lying politicians.
The liars that run the USA are going to try and print their way out of this mess. Inflation will become hyper-inflation at some point. You cannot trust the government to help you. Think for yourself or suffer the same fate as the other paycheck lemmings that surround you. The cliff is coming up fast. See past and through the illusion of democracy we now live in. Follow the white rabbit.
Conforming Loan/FHA Limits Raised to $729,750 in OC
Breathe a sigh of relief. Conforming and FHA loan limits have been raised to $729,750 in Orange County. Buyers: Call your lender. Sellers: Expect more buyers knocking on your door. Homeowners: If you need to refinance now may be the
I have not been able to find a single bank doing these much hyped FreddieMac stated income loans. It’s just a mirage.