Conforming & Jumbo Loan Limts For 2008 - YET EVEN MORE Market Chatter

Possible Impact of Higher Limits

There are 19 metropolitan areas where the economic stimulus package's changes to the conforming loan limits would likely have an impact, according to this analysis from the Stanford Group Company, a Washington, D.C.-based financial services company. Of those, seven are in California and six are in the New York metro area. Stanford uses median home price data from the National Association of Realtors.

Metropolitan Area
Median Home Price(Q3 07)
Median Home Price x 1.25
Proposed New Limit
Increase Above Current Limit

Anaheim-Santa Ana, Calif.
$700,700
$875,875
$729,750
$312,750

Barnstable Town, Mass.
$400,600
$500,750
$500,750
$83,750

Boston-Cambridge-Quincy, Mass.
$414,700
$518,375
$518,375
$101,375

Boulder Colo.
$367,500
$459,375
$459,375
$42,375

Bridgeport-Stamford-Norwalk, Conn.
$491,100
$613,875
$613,875
$196,875

Los Angeles-Long Beach-Santa Ana, Calif.
$588,400
$735,500
$729,750
$312,750

Miami-Fort Lauderdale-Miami Beach, Fla.
$346,800
$433,500
$433,500
$16,500

New York-Northern N.J.-Long Island, N.Y./N.J.
$476,100
$595,125
$595,125
$178,125

New York-Wayne-White Plains, N.Y.
$550,900
$688,625
$688,625
$271,625

Edison, N.J.
$391,800
$489,750
$489,750
$72,750

Nassau-Suffolk, N.Y.
$470,000
$587,500
$587,500
$170,500

Newark-Union, N.J./Pa.
$459,700
$574,625
$574,625
$157,625

Riverside-San Bernardino-Ontario, Calif.
$377,000
$471,250
$471,250
$54,250

Sacramento-Arden-Arcade-Roseville, Calif.
$335,700
$419,625
$419,625
$2,625

San Diego-Carlsbad-San Marcos, Calif.
$589,300
$736,625
$729,750
$312,750

San Francisco-Oakland-Fremont, Calif.
$825,400
$1,031,750
$729,750
$312,750

San Jose-Sunnyvale-Santa Clara, Calif.
$852,500
$1,065,625
$729,750
$312,750

Seattle-Tacoma-Bellevue, Wash.
$394,700
$493,375
$493,375
$76,375

Washington-Arlington-Alexandria Va./Md.
$438,000
$547,500
$547,500
$130,500

Source: NAR, Stanford Group

Conforming & Jumbo Loan Limts For 2008 - EVEN MORE Market Chatter

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.

Conforming & Jumbo Loan Limts For 2008 - MORE Market Chatter

MBA (1/25/2008 ) Sorohan, Mike
The Bush Administration and the House of Representatives yesterday agreed on a $150 billion economic stimulus package that contained key components supported by the Mortgage Bankers Association.

Specifically, the package calls for Federal Housing Administration loan limits to be increased from $362,000 to as much as $729,750. The government-sponsored enterprise conforming loan limit would increase from $417,000 to a maximum of $729,750. And to provide an incentive for lawmakers to work on overall GSE regulatory reform, the loan limit increases for the GSEs are limited to one year.

MBA Chairman Kieran Quinn, CMB, praised Administration and House leaders for their bipartisan approach and quick action, saying the package will help borrowers and stabilize the housing and mortgage markets.

“This stimulus package will bring much-needed help to consumers and restore some stability to the housing and mortgage markets,” Quinn said. “Reform of the Federal Housing Administration has long been a top MBA priority. A more modern and vigorous FHA will provide another option for first time and low and moderate income borrowers and borrowers who need to refinance existing mortgages.”

Quinn said a temporary increase in Fannie Mae and Freddie Mac's loan limits, as well as a boosting of the FHA loan limit, should return liquidity to a portion of the mortgage market that has essentially been at a standstill since August. “This will be especially helpful to current and potential homeowners in areas of the country that have seen the largest price run ups during the recent boom,” he said. “It is not coincidental that many of these areas are the same ones that are now facing the most difficulty.”

In addition to the housing provisions, the package contains tax rebates of up to $1,200 per family and allows businesses to double the amount they can write off for capital investments.

President Bush said he was pleased by the quick action, asserting that while the economy was “structurally sound,” it is dealing with short-term disruptions in the housing market and the impact of higher energy prices.

“This package has the right set of policies and is the right size,” Bush said. “The incentives in this package will lead to higher consumer spending and increased business investment this year. Importantly, this package recognizes that lowering taxes is a powerful and efficient way to help consumers and businesses. I have always believed that allowing people to keep more of their own money and to use it as they see fit is the best way to help our economy grow.”

Not everyone expressed pleasure with the package. Office of Federal Housing Enterprise Oversight Director James Lockhart III said he was “very disappointed” with the proposed increase in the GSE conforming loan limit, calling it 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,” Lockhart said.

Ideologists on both end of the political spectrum also found fault with the package, saying that it did too much (conservatives) or not enough (liberals). And Senate leaders indicated that they might add provisions that the House/Administration agreement does not have, such as extension of unemployment and food stamp benefits, which they said would provide a quicker jump-start to the economy.

But House Speaker Nancy Pelosi, D-Calif., who conceded that she was not “totally happy” with the package, nonetheless defended it, calling it the result of compromise and cooperation. She said the Bush Administration made key concessions on the scope of the tax rebates, which cap at $174,000 in 2007 family income.

“Our goals were to provide working Americans who are struggling in these difficult economic times with timely, targeted and temporary relief and to quickly give our economy a shot in the arm. We have accomplished both goals,” Pelosi said. “Economists agree that any stimulus package must put money in the hands of those who will spend it quickly to stimulate the economy, and this bipartisan package does just that.”

Pelosi said the package would go to the full House for a vote next week. The bill would then move to the Senate, where Senate Majority Leader Harry Reid, D-Nev., said the goal was to have a bill on President Bush’s desk by Feb. 15. Depending on what bill the Senate passes—and how the House, Senate and Bush Administration agree on a final package—the bill’s provisions could go into effect this summer. Treasury Secretary Henry Paulson Jr. said the first rebate checks could go out as early as May.

“All these provisions should provide a boost for struggling borrowers and the stalled housing market,” Quinn said. “We are pleased to see that leaders on both sides of the aisle on Capitol Hill have indicated the measure will receive swift action and we look forward to seeing the package signed into law as soon as possible."

Conforming Loan Limts For 2008 - Market Chatter

First today, this from CNBC:

The Treasury and the House of Rep's have agreed to an economic stimulus package that will include a temporary increase in conforming loans to $625,000 in high cost areas.

The bill will now go to the Senate for its approval. Stimulus package is expected to become law by February 15th.

Then a few hours later, this from OFHEO:

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.

###

OFHEO's mission is to promote housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae and Freddie Mac.

------

Controversy! Borrowers and Mortgage Professionals in high cost areas are drooling over this, and OFHEO is cringing. A wet blanket for Bush's stimulus package. We'll see how it all unfolds...

So what do you do about it? If you have a loan balance (combined or in a single lien) somewhere between 417k and 625k, you need to get ready. Refinancing into this market is going to make sense under most circumstances, as we have seen 30 year fixed rates as low as 5.250% for conforming sized balances this week. Call your broker to discuss it. The landscape for borrowing money has changed dramatically over the past 6 months. If your broker has quit the business, and left you to figure it out on your own, get in touch with me here.

John Mauldin Waxing Political

Frequent visitors know I am a fan of Economist John Mauldin (recently voted as the runner up to Warren Buffet for MotleyFool's Investor of the Year Award). I find his economic insights both informative an entertaining, and his newsletter can become addictive to be perfectly honest. Give it a try here.

I don't usually get into politics, mainly because I find it difficult to find politicians worthy saying nice things about. And you know what they say about what to do when you can't think of something nice to say.

But if Mauldin can make an exception to the rule, I can at least point toward his newsletter. I think it is important to read. I can point to several cases where politics over-ruled economics and caused major problems in our economy (take The Great Depression for one). There is a real danger when politicians pander with empty promises that they know they cannot (or should not) back up. Telling the voting public what they want to hear - or what the candidate thinks they need to hear - when it isn't realistic or good for us anyway is a reckless but common practice by these folks. I'll leave it to Mauldin to pick up from here to illustrate why when it comes to our economy, almost all politicians are donkeys.

Read it here. Enjoy...

BART Fares Are Up Jan 1

BART fares are up as of January 1, 2008 - 10 to 30 cents per trip. Minimum fares are now at $1.50, while longer trips, such as Millbrae to Pittsburg are up to $6.60.

Small adjustments like this may not seem like much, but over time they can add up. Understanding the costs of homeownership means consideration of several overlooked factors - such as commuting costs. When fuel and transportation costs on the rise, something called an "affordability index" is altered. This might make the less-expensive homes in the outer-lying metro areas effectively more expensive.

When planning a new home purchase, it is best to be cognizant of all true costs associated with your decision. BART fare inflation might be small one, but there are so many other factors worth evaluating. Make sure you understand how to evaluate variables like this, opportunity cost, etc. You can email me if you have questions.

Spreading Rumors

You may have noticed that Countrywide’s stock price is down 20% this morning, into the $6 range. The price is down based on rumors of a credit downgrade and possible bankruptcy filing.

From a colleague of mine:

"One buddy, who works for a large investment bank, wrote to me and said, “Investors are literally buying thousands upon thousands of puts to bet on its demise - keep in mind every thousand puts is equivalent to 100K shares of stock - I have seen about 100K puts change hands myself - that's 10 million shares.”

Countrywide's fate has big implications for the mortgage market and the mortgage industry. There are a lot of eyes on this...