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Fannie Mae Loan Limits May Be Raised - 1/30/08
Some REALLY positive news, but
more work needs to be done in order for this impressive bill
to make an impact by FEB 15TH. Will keep you informed but
here a brief summary of it...
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.
HERE'S SOME Sources and helpful links:
• Inman News
• HR 5140
• FHA Loan Limit Search – (Current Fannie Mae Loan
Limits)
Mortgage News 1/24/08 - Fed Makes A Move
My message
today is intended to make sure you are well-armed to discuss
yesterday's Fed activity with your customers from the
knowledge from our Capital Markets. Fears over this
trend sparked a severe sell-off in Asian stock markets on
Monday and that sell-off then spread to our own stock
markets on Tuesday. The downgrade of a large bond insurance
company from AAA to AA and higher than expected losses from
several U.S. banks also contributed to the market's fear.
Thankfully, the Fed reacted decisively with a 75 basis point
reduction in the Fed Funds rate to prevent complete panic in
the U.S.
stock markets.
However, the market clearly does not think this was enough
to avert recession and expects at least another 50 basis
points from the Fed at next Wednesday's regularly scheduled
meeting. Based on their actions and comments, we can infer
that the Fed too is now more concerned about economic growth
than they are about inflation. Recent economic data –
unemployment, factory production, housing, and inflation –
indicate
that this shift in concern from inflation to economic growth
is probably well justified.
I want to point out that the sell-off in stocks yesterday
was accompanied by a strong “flight to quality” rally in
Treasuries. Treasury bond yields fell between 30 and 15 bps
and that rally continues this morning. In addition, the
yield curve is becoming “steeper” as shorter-term rates fall
faster than longer-term rates. Unlike last year's
flight-to-quality Treasury bond rallies, this time agency
MBS are not what the market is fleeing from and they are
actually trading very well. There are two significant
results from all this that I want to draw your attention to:
1. Mortgage rates have fallen considerably and most of the
2006 and 2007 originations are now attractive refinance
opportunities
2. The steeper yield curve means that ARMs could become a
more attractive alternative to some borrowers
Bottom Line -
Start planning to refinance ASAP!
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