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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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