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Cap on conforming mortgages to go from $417,000 to $625,000

GetRealGetReal
edited January 2008 in Seattle Real Estate
The new stimulus package of the Bush administration (approved today) will increase the conforming mortgage cap backed by Fannie Mae & Freddie Mac to $625,000. This allows one to buy a decent house using just one conforming mortgage (current 30-year fixed-rate is 5.625%), i.e. no second mortgage (with PMI) or jumbo loans. This will last until Dec 31.

I would expect that this should stimulate RE buyers in the Seattle area.

Comments

  • laxtosnocolaxtosnoco
    Not quite. PMI is determined by whether or not the LTV is 80% or higher. Plenty of conforming loans have PMI attached to them.

    That said, if the limit is increased, interest rates on what were formerly jumbo loans should decrease.
  • Rhonda PRhonda P
    It's my understanding that the loan amounts may be based off of 125% of the local median home prices up to $730k and I've also heard the $625k figure. There's been a lot of mis-information today. We really won't know for sure until Bush gives his John Henry on it. I believe this will only last through the end of 2008.
  • AwaySoonerAwaySooner
    edited January 2008
    Why? You guys think this will help housing market in Seattle? The bond market doesn't agree. It's up 6% in one day. The credit market set interest rate, not the Fed. Wait and see...
  • Rhonda PRhonda P
    Currently, I'm stucturing transactions with a conforming first and a second mortgage for Jumbos (where this makes sense). It will be more affordable for homeowners to have conforming rates for the entire mortgage than a piggyback situation.
  • Rhonda PRhonda P
    Plus...FHA is going to be at the same loan limits as conforming...saving some of the subprime ARM buyers IF they kept their credit clean for the last 12 months and if they LTV is 95% or lower.
  • BB
    The big question to ask is, WHO benefits from this racket?

    It's a rhetorical question, no need to make the shameful answer explicit.

    :(
  • Rhonda PRhonda P
    I'll answer anyhow (your post reminds me of the movie I just watched last weekend with my kids, Mr Woodcock)...in addition to Loan Originators, this will also benefit home owners who need out of their ARMs and non-conforming (jumbo) buyers... It will help RE agents, too. Not sure what the final figure will be for the new limits in our area so it's hard to say just how much of an impact this will have. The spread on Jumbo vs conforming rates has been huge (over 1.25% currently).
  • SunTzuSunTzu
    "...Finally, upping loan limits for Fannie and Freddie will help only borrowers in the best financial conditions. In addition to limits on loan size, the GSEs have strict requirements for income verification and down payments that most subprime borrowers cannot meet. Wealthy home buyers in states like California, Florida, and New York will find it easier to get a loan, but without a functioning secondary market for subprime mortgages, borrowers with poor credit, no money for a down payment and little to no equity are still stuck.

    The only positive to be gleaned from the proposed stimulus package is an expansion of the role of the Federal Housing Administration, or FHA, which provides loans to certain subprime borrowers. Although the FHA means well and many of its programs do help low-income home owners, the implicit backing of the FHA gives loan originators no incentive to prudently underwrite a loan, inviting rampant fraud and predatory lending into the market for FHA loans.

    Washington is caving to pressure from Wall Street and real estate groups that stand to lose if home prices continue their downward slide. The CFO at Los Angeles-based KB Homes (KBH) sums up the conflict of interest by saying the stimulus package "[is] a shot in the arm to the market. It's going to spur people to move up to a more expensive home, and that's going to get the new and used markets moving again."

    By propping up home prices and lowering interest rates, policymakers push distressed homeowners deeper into trouble, while bailing out banks and homebuilders who profited from putting thousands of families on the streets."
  • Rhonda PRhonda P
    I'm wondering if conforming rates will actually increase to more of a blend between what is currently conf/jumbo once this happens to compensate for risk to investors.
  • AwaySoonerAwaySooner
    Time will tell. After the stimulus package annoucement, TNX went up. Today with the news that the Senate possibly opposing, the rate went down a little.
  • MarkorMarkor
    GetReal wrote:
    This will last until Dec 31.
    If it was until the first Wednesday in November, it would have been more honest.
  • UbersaladUbersalad
    I think I'll just wait for $1,000,000 conforming limit and 3% rate. It's coming soon...
  • AwaySoonerAwaySooner
    Stimulus plan may lead to higher mortgage rates

    http://news.yahoo.com/s/nm/20080125/bs_ ... 9e5SUG1vAI
  • jillaynejillayne
    higher mortgage rates are headed our way no matter what happens. It is only a matter of time.
  • Rhonda PRhonda P
    I agree with you Jillayne. Rates are all ready bracketed by loan amount and the lenders will probably have an add to loans for $417,000 - $650,000 (or what ever it is). Some of the lenders I work with are all ready adding 0.25% in fee to all rates that are sold to Fannie/Freddie using a nifty "current market" term. If Fannie and Freddie are taking on a larger portfolio, I'm sure we'll see more adds to rate.

    For loans over $417,001, even with adds, the rate will most likely be better than what the Jumbo Borrower might have received in present times (since August).
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