Although NAR is urging realtors to contact their congress-people to whine about how lowering the loan limits will cause the world to end, it appears that Fannie/Freddie/FHA max loan amounts will be dropping next week.
Hat tip to DS for sending this along, from Yahoo Finance:
On Oct. 1, the size of mortgages eligible for purchase by Fannie Mae and Freddie Mac will shrink. That isn’t necessarily a big deal in most parts of the country; the new lower limit of $625,500 — down from today’s $729,750 — still is big enough to cover most homes in almost all markets in the United States.
Furthermore, mortgage bankers are stepping up with new money to cover those bigger loans, reports Mortgage Daily. “Programs here and there are popping up,” says publisher Sam Garcia. He reports that some new lenders, including TMS Funding and New Penn Financial LLC, are launching programs that will make mortgages as big as $2 million available to lenders with good credit scores and enough cash to keep up with the payments. And many existing mortgage lenders currently will make those so-called “jumbo” loans and just keep them in their portfolios instead of selling them.
But those loans will cost more. Currently the difference between rates on so-called conforming loans and private-made loans is about 0.64 percent. Over the last two years that spread has been as low as 0.48 percent and higher than one percent, says Garcia.
So in some pricey places, the new limits will really pinch borrowers. Those limits vary from market to market and are determined in part by local housing prices. In expensive housing markets where prices have fallen, the limits will drop the most.
Hardest to be hit, according to a new analysis by Move.com, will be San Diego, where loans up until $697,500 qualify for Fannie and Freddie until Sept. 30. On Oct. 1, that limit drops to $546,250, a $151,250 difference.
Folks there who want to borrow a bunch for a home will see their costs rise significantly.
A San Diego homebuyer who needs $600,000 would pay $2,937 a month for a 30-year loan at today’s rate of 4.18 percent, according to Bankrate.com. Starting next month, if rates stay stable and that borrower goes to a private lender, he would pay $3,155 a month. That’s $228 more a month, or $82,080 more over 30 years.
Some buyers (and lenders) may try to get around that by piggy-backing loans; piling a smaller non-conforming loan onto a conforming loan.
Here are some other areas, most often searched on Realtor.com, that could see significant changes in their loan limits, according to the Move analysis.
You’re an international star!
http://english.aljazeera.net/programmes/meltdown/2011/09/2011914105518615434.html
Up there with the Tan Man and Maxine.
One has to wonder how large this sour spot is “$625,500 — down from today’s $729,750”
I guess someplace like CV has quite a few in this sour spot, but the majority of SD falls below this I would think and the higher end it seems it would not make any difference.
Being that this is unlikely to stimulate the economy, hmmm,
What was the reason they are doing this again ?
Beats me, but agreed, there won’t be much difference in the market.
Last week we saw that, of the FHA sales in NSDCC between $550,000 and $700,000 this year, only 2% were FHA.
Why do this? To begin getting the gov out of the mortgage business and lower their go-forward exposure. Why should they be in the market above the bare bones entry/move up sized loans, if at all? $700k gov exposure to a single home? What ever happened to the old limits of $419k or so?
This isn’t just FHA, it’s Fannie and Freddie as well. The difference is Fannie and Freddie will only drop to the old $417k limit. Here’s the link to the LA Times story.
http://www.latimes.com/business/la-fi-loan-limits-20110927,0,7797548.story
The gross reduction and the percentage of value reduction looks to impact Monterey County the most. Secondary markets such as Merced and the Inland Empire that rely more on FHA financing will also probably suffer, although the higher down payment Freddie and Fannie products will take up some of the slack.
AI,
Jumbos will take the place of Fannie/Freddie at a slightly higher rate – in the article I featured, it shows that the difference between the super-conforming Fannie/Freddie $600,000 mortgages and jumbo loans is $228/month.
The latimes.com article the CAR president is quoted as saying, “This is just going to kill us”.
Another babbling idiot heading a realtor organization who shoots off her mouth without doing any analysis at all.
It is $228/month lady. Nobody I know will be jumping out of building to kill themselves over $228/month, and if there are people like that then you should tell them to NOT BUY A HOUSE!
Apparently there are other counties that have a greater drop than SD County, so we’re aren’t #1, but I’ll blame that on Move.com who reported it first.