I hope you all find this information useful. While the following gives good insight to the current state of the market, it will not apply to everyone's situation. Please contact me to discuss.
**PLEASE NOTE MY COMMENTS AT THE BOTTOM OF THIS PAGE**
A $150 billion economic stimulus plan being negotiated by the Bush administration and congressional leaders could include a temporary boost in the $417,000 conforming loan limit on mortgages eligible for purchase or guarantee by Fannie Mae and Freddie Mac.
The government-sponsored enterprises, or GSEs, may soon be allowed to back loans up to $625,000 nationwide and $700,000 or more in high-cost areas, according to published reports on the negotiations.
The Associated Press reported that House leaders of both parties have agreed to increase the conforming loan limit to $625,000 for one year, although Senate lawmakers and the Bush administration had not signed off on the idea.
Some Senate Democrats had been pushing for an even larger increase in the conforming loan limit in high-cost areas like California and Florida.
A Treasury Department spokeswoman told Reuters today that the administration still sees an increase in the conforming loan limit as tied to GSE reform.
The Bush administration may be seeking a compromise that would allow the smaller, temporary increase in the conforming loan limit agreed to by House leaders if Senate Democrats agree to move forward with a GSE reform bill.
The House of Representatives passed a GSE reform bill in May, HR 1427, that would create an independent agency to oversee Fannie and Freddie. That bill would permit the companies to guarantee and resell loans of up to $625,000 in high-cost housing markets, but not hold them in their own investment portfolios.
So-called "jumbo" loans that exceed the conforming loan limit have become more expensive and harder to find since August. Wall Street investors have drastically scaled back purchases of securities that had been a primary source of funding for jumbo, alt-A and subprime loans because of fears about rising defaults and falling home prices.
In states like California and Florida, where the median home price in some markets far exceeds the conforming loan limit, the increased cost and reduced availability of jumbo loans has been blamed for worsening the housing downturn.
The National Association of Realtors maintains that raising the conforming loan limit to $625,000 would prevent 140,000 to 210,000 foreclosures, bolster home prices by 2 to 3 percentage points, and increase economic activity by $42 billion (see story).
California Gov. Arnold Schwarzenegger this week urged Congress to pass legislation to raise the conforming loan limit to $625,000 in high-cost housing markets, saying about half of all home purchases in the state require mortgages that exceed the current limit.
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Please keep in mind this is not a done deal and the bill has not been passed and signed into law. However, if it does, raising the conforming loan limit will allow many people to save close to 1% on their interest rate allowing them to either buy more house or buy it more comfortably.
In my opinion, it will create one of the biggest refinance booms we have seen in a very long time. This will allow many people to get rid of their ARM's and get into a low rate 30 year fixed rate mortgage. Many people who have jumbo mortgages can refinance into conforming rates saving themselves a lot of money per month.
Please visit http://www.jeffkornfeld.com/Home and let me know how I can help you.
With all that has gone on in the mortgage market this past month, interest rates are at their lowest levels in close to 5 years. This is true for loans of $417,000 or less. These are commonly referred to as "conforming loans".
Loans over $417,001 are called non-conforming or jumbo loans and they too have come down quite a bit.
Depending on your loan scenario, a rate of 5.125% is available for a conforming 30 year fixed without any points!!
If you are facing a reset of your adjustable rate mortgage or, have a rate you want to compare, please contact me at: jkornfeld@wcslending.com or call me at 917-974-7525.
Don't wait..contact me to lock in these great rates before they start to rise.
Thanks,
Jeff
The Federal Reserve took the rare action of slashing short-term interest rates between scheduled meetings in response to a global meltdown in financial markets.
The Fed cut the target for the federal funds rate by a hefty three-quarters of a percentage point, to 3.5 percent. The prime rate will fall by three-quarters of a point, too, to 6.5 percent. Over the coming weeks and months, interest rates will fall on home equity lines of credit and many variable-rate credit cards. Yields on shorter-term certificates of deposit are likely to fall.
It's too soon to say how the Fed rate cut will affect fixed- and adjustable-rate mortgages and auto loans. Those types of loans are only indirectly affected by the rates that the Fed controls. But when the Fed does something unexpected, it can create an impact.
"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth," the Fed said in a statement. "While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
The central bank went on to say that "downside risks to growth remain," and that inflation is expected to moderate over the next few months, although prices merit close watching.
This action comes as stock indexes are plunging across the globe. Stock indexes in Hong Kong, Japan, India and South Korea fell at least 3 percent Monday. British, French and German stock indexes fell at least 5.5 percent. Canadian, Brazilian and Mexican stock indexes fell at least 4.75 percent.
Surprise expectedThe move by the Fed's Open Market Committee came as a minor surprise because it occurred between the central bank's regularly scheduled meetings. In the last week, as the dollar continued to weaken, stock prices fell, and more and more economists said a recession is imminent, observers began to speculate that the Fed would cut rates before its next scheduled meeting, on Jan. 29 and Jan. 30.
The vote was not unanimous among the 10-member Federal Open Market Committee that sets rates. Eight members voted for the rate cut. William Poole, president of the Federal Reserve Bank of St. Louis, voted against the cut. The Fed said that Poole "did not believe that current conditions justified policy action before the regularly scheduled meeting next week." Frederic Mishkin, a member of the Fed's board of governors, was absent and did not vote.
The last time the committee made a surprise rate cut was Sept. 17, 2001, six days after the terrorist attacks. Back then, the Fed was reacting to a lack of cash in financial markets. This time, the Fed was responding to anxiety about tight credit brought on by unexpectedly high defaults in some types of mortgages. The problems in the mortgage business spread into other credit markets, affecting the availability of money for private equity firms that borrow huge sums to buy publicly traded companies. Some hedge funds posted gigantic losses because of mortgage-related problems. The pain was felt globally, and not just in the United States.
The federal funds rate is the target interest rate for banks borrowing reserves among themselves. The discount rate is the interest rate that the Fed charges banks to borrow reserves from the Federal Reserve. The Fed wants to be the lender of last resort: It wants banks to borrow from one another at the federal funds rate before borrowing from the Federal Reserve at the lower discount rate.
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