Buyers of larger homes in Orange County got a break this week as rates fell on big home loans following a move by Fannie Mae, the largest U.S. funder of mortgages. Of course, buyers need to bring some hefty cash to the table to get the lower rate.
After weeks of criticism from brokers and lenders, Fannie Mae cut a premium it had been charging on so-called jumbo-conforming loans above the old conforming limit of $417,000 and the new one of nearly $730,000 in high-cost markets like Orange County. (The higher limit is good until Jan. 1, 2009, though the U.S. House on Thursday passed a bill to make the increase permanent. President Bush has threatened to veto the bill, which also would let the government insure up to $300 billion in mortgages to help homeowners avert foreclosure.)
Al Hensling, head of United American Mortgage in Irvine, said about the change: “Christmas came early.”
Hensling said on Tuesday, before Fannie’s change, a 30-year fixed jumbo-conforming loan went for 6.5 percent with a one-point fee. On Wednesday, after the announcement, the rate on the same loan with a one-point fee dropped to 5.75 percent.
The catch: borrowers must come up with 15 percent down on a purchase. However, if Fannie already owns the loan, it will allow a refinance up to 120 percent of the home’s current market value to give homeowners a break if property values have plummeted in their neighborhood and they have kept current with their mortgages, Hensling said. (No ‘cash-out’ refinances allowed.)
However, according to data aggregator Newspaper Chart Services the average jumbo-conforming rate in Orange County on Thursday was 6.833 percent with a one-point fee, down from 6.927 percent on Wednesday. That makes me think only some lenders immediately dropped their rates following the news from Fannie.
Here’s GOOD loan news from a lender friend of mine:
A few companies have significantly lowered their Jumbo Conforming 30 year fixed rates. The trend will likely continue for all lenders to modify their JC pricing, but for now here is a comparison:
Countrywide: 6.375 1.0 point No change from last week
Wells Fargo 6.250 1.0 point No change from last week
IndyMac Bank 5.750 1.25 points 6.125% -0- points
Wachovia 5.875 1.0 point 6.250% -0- points
The spread between Regular Conforming ($417k and below) and Jumbo Conforming ($417k to $729k) is now about even.
So much for the new “jumbo conforming” loans being considerably more expensive, and difficult to obtain. Just as predicted a month ago, these loans would “settle” into being less expensive than they were at first.
Thats true the rates came down, but they are still much more difficult to qualify for. The rate is not the problem, its qualifying for a $650,000 loan - not many can, sorry Sigh.
Supply limited SLO?
The home of college students and the nearly dead?
SLO with the job prospects of Barstow?
Come on Sigh, SLO county is a retirement community (full of SoCal expats) with a college attached and a couple of hundred thousand acres of farmland. There is no income base there to support the home values. There are, however, droves of folks moving there with pots of dead money when times are good.
This ain’t one of them.
Like Real Estate Agents, they are more focus on rate. Buying inflated house price is a big problem.
Like credit cards, these banks and lenders are more than happy in keeping you deep in debts so they can make money in a long run.
Able to pay for half a million loan for stucco box in Orange County for the next 30 years are the main problem.
test
The problem behind this freefall has not changed: Interested buyers are not qualifying. There are buyers out there, lots of them. But so what if they can’t get a loan?
SeekingAlfalfa,
One can get involved as a direct investor in such a program right now for $35,000 investment (one home) on an individual basis. The company I work with are currently rehabilitating homes in the Midwest and then structuring them so that investors can buy individual notes for $35,000 that comes with a home and “homeowner” including a note that pays $450 per month. That mortgage payment is competitive with local rents, so that finding a homeowner is not much of a problem.
Fantastic.
“Once they get an agreement with the home owner then the loan is performing and after it’s seasoned they can sell them again. This is what will start things moving again and break the foreclosure cycle.”
I notice the homeowner in the article got refinanced into a FHA . The new way for hedge funds to make money-mortgage arbitrage.! Buy loans for 60% of dollar off original-get the FHA(government) to refinance loan at 80% of original and take the loan off the books…WOW 20% profit practically risk free! Taxpayers eventually on the hook for FHA.
More Good news from the same lender as my last post:
The Economic Stimulus passed in February allowed FNMA and FHLMC (FannieMae and FreddieMac) to purchase High Cost Area Conforming Jumbo (HCACJ) loans from lenders. Loans made between $417,000 and $729,600 started closing in March of this year, but no one was willing to buy them. FNMA had not yet created bundles of mortgage securities for these HCACJ’s, nor clear guidelines on how to sell the loans in the first place. In late April these agencies contracted with several banks to accept an HCACJ loan which is why pricing for these products have dropped. What was a 6.5% 30 year fixed HCACJ in April is now a 5.75% HCACJ in May.
Good news indeed. If you are a buyer with 20% down on a $1,000,000 priced home you can get a $700,000 1st at 5.75% and a $100,000 HELOC 2nd at 5.25%. Interest rates on jumbo loans are no longer the biggest stumbling block in front of home buyers today.
And, yes, Virginia, there are PLENTY of such buyers out there, going into escrow.
I would think it has nowhere to go but down
sick of saving, not quite. The 80% is on current value. Yes, the investors make money, but the resulting loan should be quite stable, rumors to the contrary notwithstanding.
You’re the man, sigh!
More Good mortgage news from a lender friend:
The Economic Stimulus passed in February allowed FNMA and FHLMC (FannieMae and FreddieMac) to purchase High Cost Area Conforming Jumbo (HCACJ) loans from lenders. Loans made between $417,000 and $729,600 started closing in March of this year, but no one was willing to buy them. FNMA had not yet created bundles of mortgage securities for these HCACJ’s, nor clear guidelines on how to sell the loans in the first place. In late April these agencies contracted with several banks to accept an HCACJ loan which is why pricing for these products have dropped. What was a 6.5% 30 year fixed HCACJ in April is now a 5.75% HCACJ in May.
Good news indeed. If you are a buyer with 20% down on a $1,000,000 priced home you can get a $700,000 1st at 5.75% and a $100,000 HELOC 2nd at 5.25%. Interest rates on jumbo loans are no longer the biggest stumbling block in front of home buyers today.
And, yes, Virginia, there are PLENTY of such buyers out there, now going into escrow.
Hey Matt? I’m curious as to why you deleted the post I submitted about the new higher amount conforming loans ( Up to $729,500.) no longer being priced at a premium, over the old lower maximum of $417,000?
Nice article Alfalfa. Another force working to stabilize the market.
Why is it that I can post easily here, but not on Lansner’s column? Guess I’ll have to defect.
“sick of saving, not quite. The 80% is on current value. Yes, the investors make money, but the resulting loan should be quite stable, rumors to the contrary notwithstanding.”
This investor couldn’t make money if it wasn’t for the the backdrop( risk transfer) of moving these mortgages into government loans. Another case of private profits at the expense of socialized risk.
Sigh,
You are a dreamer - the mortgage payment you came up with is $6000 per month, which means that if a client has no other bills they need to make $13,500 per month. If they have $1000 in other bills they need to make $15,500 per month verifiable income. So, besides the fact that someone plunked down $200k that will vainish within 12 months - you need to find a sucker that will want to pay $6000 per month for a house they cant rent for $2500 with no risk at all. You really think there are a lot of purchase like this? Oh, i forgot to add, all the 2nd mortgages I know of in CA will only go to 65% CLTV, so that HELOC option you listed is just not viable.
To MortgageMaker: I guess my friend has both a better company as a source for loans, and a better pipeline of potential borrowers than you do. My statement was a reiteration of comments I received from him - and I have no reason not to believe him.
As for your assertion that such buyers will lose their down payment over the next 12 months, that sounds to me like an opinion. I happen to have one that differs from yours. Neither one is a fact - only an opinion.
As for your claims of the lack of rentability of said property, the scenario posted was as an owner occupant, not as an investor. Even so, your estimate is WAY off.
mortgagemaker:
There are HELOCs that will go to 90% in a declining market. Problem is that the 1st’s will only go to 85%
“However, if Fannie already owns the loan, it will allow a refinance up to 120 percent of the home’s current market value to give homeowners a break if property values have plummeted in their neighborhood and they have kept current with their mortgages, Hensling said. (No ‘cash-out’ refinances allowed.)” This statement I believe is false as I have searched Fannie Ma & lenders regading this and each person believesthat this is an incorrct statement.