Shiney New and Temporary Conforming Limits…Not So Fast!

March 7, 2008 by Leave a Comment

I feverishly posted the new FHA and conforming loan limits for Washington State.  It was pretty darn exciting since many of us in the industry were hearing whisper figures of $493k or so and voila, our new FHA and conforming limit for a single family dwelling is $567,500 for King, Snohomish and Pierce Counties.  This could be a nice bump through the end of this year.

The word is out!  Many Seattle, Bellevue, Everett and Tacoma area homeowners are VERY interested and want to take advantage of "conforming rates" now.   Not so fast….sorry.  (Hey…I’m really hoping that on Monday, I’m eating my words…the proof is in the pudding).   So far all that’s happened is that the loan limits have been announced.   This whole process needs to trickle from Fannie Mae and Freddie Mac and through all the wholesale lenders before those of us on "the streets" can offer you any benefits.   

Be prepared.  I fully expect an "add to rate" on loans from $417,000 – $567,500 (or what ever your area conforming limit is).   This will be to compensate Freddie/Fannie for the additional volumes and risk they are taking on.   The big question is: how much will it be?  My best guess is anywhere from 0.25% to 1.00% to what you currently see for conforming.   

"WHAT?" You say… "You’re telling me that you just quoted 6.00% for conforming today…and 7.00% for JUMBO…yet the new conforming rate for loans over $417,000 may still be 7.00% if I were locking today?"

Yes…that’s what I’m saying.  Again, PURE speculation on my part.

The "new conforming limit" goes back to July of 2007.  It’s retroactive for jumbo mortgages still not bought on Wall Street clogging credit lines.   I think that’s where we may see the most action:  rescuing the Thornburg Mortgages of the world (or at least Wall Street).  This from Bloomberg:

Thornburg specialized in so-called jumbo mortgages of more than $417,000, which typically were used to buy more expensive homes. Until recently, such loans were too big to qualify for purchase by government-sponsored entities such as Fannie Mae. Trading for such “non-conforming loans has come to a standstill, cutting off a source of funds for mortgage companies and pushing down the value of their holdings. More than 100 halted operations or sought buyers last year.

The company’s demise would reduce liquidity even more, said Keith Gumbinger, vice president of HSH Associates, a mortgage- market research firm based in Pompton Plains, New Jersey.

“No one has had anything bad to say about Thornburg; they have served the good-quality, high end of the market,” Gumbinger said. “It’s been a good, well-run business that is taking a beating because of market conditions.”

Thornburg is not a part of the subprime melt down they are being sucked into.  My best guess is that due to the volume and risk of loans that Fannie and Freddie will take on through the end of this year, consumers will see a benefit in pricing when the credit lines have been relieved.   

This may not be the band-aid we’re hoping for.  I don’t want to be a "bummer"…I do want to be practical. 

My best advise to those in the "new (temporary) conforming market" is to not wait for the new limits to be in effect.  Check with your Mortgage Professional to see if they can switch your program to "new conforming" IF it’s a better rate/scenario for you if you’ve all ready began the process under the current guidelines.  This is something that I can offer and I would assume most Mortgage Professionals are able to as well.

Filed Under: FHA, Legislation, Mortgage, Residential Purchase

Quick 4-1-1 on Jumbo Loan-Conforming Loan Limit Increase

February 11, 2008 by 6 Comments

I’m noticing that a lot of Mortgage Porter readers are finding my by googling various terms to learn more about when and how the conforming loan limits will be increased.

Here’s what I know (and what I’m speculating) so far:

I’ve heard that President Bush will be signing the bill into law this Wednesday.  Then HUD has 30 days to publish what the median home prices are for various areas.  The new conforming loan limit will be based on 125% of those values.

It’s estimated in the Seattle-Bellevue-Everett area, our new loan limit will be just shy of $500,000. 

While this process is taking place, Fannie and Freddie need to figure out how they’re going to deal with this influx of new business.  Underwriting guidelines will need to be considered and distributed to lenders.  Also, I will eat a shoe if there are no "add to rate" to loan amounts $417,001 and over.   I’m estimating the add will be 0.25% – 0.50% to the now conforming rate.   For example, if your loan amount is $417,000 your rate for a 30 year fixed could be 5.500% – if your loan amount is $417,001 your rate would be 5.75% – 6.00%.   This is still more attractive than what the current jumbo rates are.

Remember, the increase to the conforming loan limit is temporary.  It is currently only valid through the end of 2008.  Who knows, maybe Congress will extend it as they have the PMI deduction if they see it as a benefit to the American economy.

You can see this process will take a little time.  I’m assuming that Fannie and Freddie are diligently working on the guidelines/pricing issues and not waiting for HUD’s home value information.   Even so, it could very well be some time in March before this all takes place.

Stay tuned!

Filed Under: Jumbo/Non-Conforming, Legislation

Conforming Loan Limits to increase soon

February 8, 2008 by Leave a Comment

Being a Certified Mortgage Planning Specialist has it’s advantages.  On being up to the minute updates on legislative changes that impact the mortgage industry.  I just received this email from CMPS which is speculating that the new conforming loan limit in the Seattle-Bellevue-Everett area may be $531,377.  HUD has 30 days to publish what will be used for median home prices. Here is the memo from CMPS:

 

CMPS Legislative Update –  Determining "High Cost" Areas


As we reported to you yesterday, the US Senate passed an expanded version of HR 5140 – an economic stimulus package that includes a temporary increase in the conforming loan limits from $417,000 to as high as $729,750 in high cost areas.  The two things you must know in order to determine if you are in a high cost area:

1.  You must know the formula.  If 125% of the local area median home price exceeds $417,000, the temporary loan limit would be that 125% of the median home price with a cap of $729,750. 

2.  According to HR 5140, the Secretary of Housing and Urban Development will publish the median house prices within 30 days.  We contacted the Public Affairs office of HUD directly to ask if there is anything definitive to reference in the interim, and they said, "no."  The Wall Street Journal published median house prices recently, and you may want to reference this information to get an idea of which areas will exceed the $417,000 limit.  The median housing prices can be found in the second graphic on this web page. 

This will be great news for those with "jumbo mortgages" or piggy backs that need to refinance.   Once I have more "firm" information, you can bet I’ll let you know!

Filed Under: Jumbo/Non-Conforming, Legislation

Senate Banking Committee Meeting Now

February 7, 2008 by Leave a Comment

The Senate Banking, Housing and Urban Affairs Committee is now hearing testimony including the very hot topic of temporarily raising the conforming loan limit and Fannie/Freddie reform.

Click here to watch live.  (Requires Real Player…and it’s not working for me).

OFHEO’s testimony: Download http_www.ofheo.gov media te… 2708LockharttestimonyWeb.pdf

Stay tuned…

Update February 7, 2008  2:00 p.m.:  The Senate has passed the stimulus package.  The Bill is expect to be quickly signed off by The House and then President Bush…possibly by this weekend.

Filed Under: Jumbo/Non-Conforming, Legislation

A Jumbo Question: Conforming Loan Limits

January 31, 2008 by Leave a Comment

A Mortgage Porter reader asks a very timely question regarding the proposed conforming loan limit:

"I just spoke to one of the major lending institutions and he recommended that if I can wait 3 – 4 weeks we may see a change in the non conforming guidelines such as amount that is normally set t $417,000 jump to either $620,000 or $630,000. 

Would you have any information on these possible changes and time line?"

Many people are full of questions regarding what’s going on with the conforming loan limit.  Different figures and stats are being quoted from various sources.

The Certified Mortgage Planning Institute issued this statement yesterday:

CMPS Legislative Update – Higher loan limits inching toward reality!

Yesterday, the US House of Representatives overwhelmingly passed HR 5140 – an economic stimulus package that includes a temporary increase in the conforming loan limit and the upper threshold for FHA loan programs to as much as $729,750 in high-cost areas.  The temporary increase would last only until the end of 2008.  The bill would also restrict Fannie Mae, Freddie Mac and the Federal Housing Administration from guaranteeing or purchasing loans above 125 percent of the median home price for a given area.  That means that the existing $417,000 conforming loan limit for mortgages eligible for purchase by Fannie and Freddie would not increase in areas where the median home price is $333,600 or less.  The problem of course, is that as of right now, no one knows what the median home price is in different markets because this data has never been published by HUD!

Therefore, it would be up to the Secretary of Housing and Urban Development to determine the median home price for different housing markets "as soon as practicable," but no later than 30 days after passage of the bill, relying on existing commercial data where needed.  In other words, if median home prices in your marketplace are $336,000 or less, this bill won’t really affect you; and there’s no way to tell if median home prices in your area are higher than $336,000 until HUD publishes this data.  Nevertheless, jumbo relief is certainly on the way for places like California where median home prices are certain to be above $336,000.

Currently, the loan limit for FHA loan programs is between $200,160 and $362,790, depending on the county where the property is located.  The proposed higher limits for FHA loan guarantees are also set to expire at the end of this year, unless Congress passes other legislation intended to modernize FHA programs by introducing risk-based pricing and lowering down-payment requirements.

While House leaders thought they had reached an agreement with the Bush administration to include FHA modernization as part of the stimulus package, they agreed to continue working on that issue separately at the administration’s request, the Associated Press reported.

In order to make higher limits a reality, the next step is for the Senate to pass the bill and for the President to sign it into law.  The target date for final passage set by the White House and Congressional leaders is February 15, so let’s hope for the best and we’ll be sure to keep you posted as we have more information.

Sources and helpful links:

·          Inman News

·         HR 5140

·         FHA Loan Limit Search – (Current Limits)

Filed Under: Jumbo/Non-Conforming, Legislation, Mortgage

A Reply from Senator Patty Murray

January 31, 2008 by Leave a Comment

Dear Mrs. Porter:

Thank you for contacting me regarding the issue of subprime mortgages. It is good to hear from you.

As you know, in 2008 an estimated two million homeowners could lose their homes as a wave of interest-rate resets are expected on adjustable rate subprime mortgage loans. If nothing is done, this level of foreclosures will undoubtedly result in hundreds of billions of dollars in lost home equity, declining home values in communities across the country, and an overall decline in the U.S. economy. I have long been concerned about this situation. Last spring, as Chairman of the Transportation and Housing and Urban Development Appropriations Subcommittee, I held a hearing to analyze proposals to reform and modernize the Federal Housing Administration (FHA) and other potential remedies to help stem the tide of projected home foreclosures.

I am actively engaged with my colleagues to identify ways to prevent the projected wave of foreclosures from being realized in the coming years. I strongly support efforts between borrowers and lenders to forestall foreclosure, but I believe there are steps that Congress must take as well.

To help educate borrowers of their options to avoid foreclosure, I secured $180 million in the Fiscal Year 2008 Consolidated Appropriations bill to provide housing counseling services across the country. Housing counseling programs assist borrowers with mortgage modification and restructuring so they can avoid or mitigate the losses associated with foreclosure.

In addition, I was a key leader in pushing S. 2338, the FHA Modernization Act of 2007, sponsored by Sen. Christopher Dodd (D-CT), through the Senate. The FHA Modernization legislation provides the FHA new flexibility to tailor products to customers based on their credit rating, income, and relative risk. FHA modernization is a key component in addressing the subprime crisis because it will enable the FHA to offer safe, alternative mortgage options – as opposed to adjustable rate mortgages to borrowers.                                                                                                                             

As the 110th Congress progresses, I will carefully consider all legislation regarding mortgage reform, and will certainly keep your thoughts in mind. Thank you again for contacting me, and please don’t hesitate to share your thoughts in the future.

I hope all is well in Seattle.

Filed Under: Legislation

A Taxing Issue

January 25, 2008 by 1 Comment

According to this article in the Seattle PI, King County Tax Assessor Scott Noble is warning of possibly the largest property tax increase in Washington State’s history.

"This change … will produce the biggest property tax increase onto residential property owners in the history of the state of Washington," Noble said in an e-mailed warning last week to Finance Committee chairmen.

In King County alone, the change would shift as much as $200 million of taxes onto residential property owners, he said.

"In our budget-based property tax system, reductions of valuations will produce tax shifts onto other taxpayers, and my experience with advocates from our large commercial taxpayers suggests a large increase of appeals and lawsuits from these property owners who have sizable resources," Noble said in the e-mail.

House Bill 2977

Senate Bill 6517

Concerned?  You may want to contact your state representatives to express your concern, if any, of having your property taxes increased for the benefit of commercial business.   

Filed Under: Legislation

Closer to Higher Conforming and FHA Loan Limits

January 24, 2008 by Leave a Comment

Today Pelosi and Paulson announced bits and pieces of the Economic Stimulus Plan which includes temporarily increasing the conforming loan limit (currently $417,000) and FHA’s loan limits (vary by county).

Here’s what I understand so far:

  • Loan limits would last until December 31, 2008.
  • Both Conforming and FHA loan limits would be based on 125% of the local median home prices up to $730,000 (this is according to CNBC).
  • It’s also reported that both loan limits may be increased to $625,000.

This is expected to be approved by Bush very quickly…stay tuned!

Update January 24, 2008 2:00 p.m.

I just received this memo:

For Immediate Release
January 24, 2008

STATEMENT OF OFHEO DIRECTOR
JAMES B. LOCKHART ON CONFORMING LOAN LIMIT INCREASE

We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform.  To restore confidence in the markets we must ensure that the GSEs’ regulator has all the necessary safety and soundness tools.

Yesterday Chairman Dodd talked about moving a GSE reform bill early this year.  We are ready to work with him and the Senate Banking Committee.  We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit moves through their rigorous new product approval process quickly and has appropriate risk management policies and capital in place.

Filed Under: Jumbo/Non-Conforming, Legislation
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