NEW YORK (CNNMoney.com) -- Mortgage costs just got cheaper for buyers in high-cost areas.
The size of loans that can be guaranteed by Freddie Mac and Fannie Mae was raised today by the Office of Federal Housing Enterprise Oversight. The new, higher loan limits will stay in effect through the end of the year, allowing the government sponsored enterprises (GSEs), to buy much higher-priced mortgages in some areas of the country.
Also today, the size of the loans that the Federal Housing Authority (FHA) can insure was raised by Housing and Urban Development (HUD).
Both moves will lower borrowing costs for buyers of higher priced homes, and aim to boost flagging real estate markets.
Previously, Fannie and Freddie could only insure mortgages of up to $417,000, called conforming loans. That meant, assuming a 20% down payment, that only buyers of homes costing $521,500 or less were eligible for mortgages with GSE backing.
The new loan limits for Fannie and Freddie vary by area based on local median home prices and go as high as $793,750 in Honolulu. (For details, see table below).
Loan limits for FHA-insured loans were even lower; no more than $362,790. Now mortgages of up to $729,750 will qualify for FHA insurance.
The problem was that there are whole swaths of the nation where the typical home cost far more than that, and non-conforming or "jumbo loans" carry interest rates of about a point higher. For a $500,000 mortgage, that's an additional spending of $330 a month.
In many parts of the country prices are much higher. In San Jose, Calif, the median priced home costs nearly $850,000, according to the latest figures from the National Association of Realtors. In San Francisco, the figure is nearly $780,000; in Anaheim, Calif.; $657,000; in Honolulu $625,000; and in the New York metro area, $525,000. That means more than half the loans in those markets would not qualify under conforming loan limits.
"Families in high-cost states have been priced out of FHA-backed loans," HUD Secretary Alphonso Jackson said earlier today, in a speech before the Las Vegas Association of Realtors. "This has created a vacuum, filled by exotic subprime loans."
During the liquidity squeeze that began during the summer of 2007, jumbo loans became very difficult to find even for well-qualified borrowers. that made it hard to buy homes in certain regions, freezing up real estate markets.
By making it easier for buyers to get loans, regulators hope to get these markets moving again.
The new loan limits affect 71 metropolitan areas, as well as 21 counties outside of those metro areas.
I thought you might enjoy reading the following article. We all hear the negativity in the news but, with turmoil comes opportunity. In this market you can buy a lot more home for your money. With respects to a mortgage, having a good down payment will make your rate and payment more manageable.
As always, please contact me if I can be of help. 917-974-7525 or jkornfeld@wcslending.com
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NEW YORK (CNNMoney.com) -- It may be the best time to buy a house in more than four years.
Home prices have dropped so quickly and so far that valuations - the difference between what a home should cost and its actual price - are the lowest they've been since 2004, according to a report.
The Cleveland-based bank National City Corp. (NCC, Fortune 500), together with financial analysis firm Global Insight, revealed Tuesday that more than 88% of the 330 housing markets surveyed showed price declines and improved affordability during the last three months of 2007.
"Housing valuations are almost back to long-term norms," said National City's chief economist, Richard DeKaser. He called current affordability "the best in the past four years."
But DeKaser cautioned that home prices could fall even further.
"This isn't to say home price declines are over," he said. "We could move below historic norms. By the end of 2008, housing markets could be broadly under valued."
There are still 21 housing markets, or 6% of those surveyed, that are severely over valued, including Atlantic City and Madera, Calif. That's down from 56 overvalued markets at the peak of the housing bubble in 2006.
The report compares actual median home prices with what the authors determine are proper home values based on population density, relative income levels and interest rates, as well as historically observed market premiums or discounts, to determine whether markets are over or under valued.
The report also factors in market intangibles that make some areas more desirable places to live, and more expensive.
"Declines are no longer confined to once-frothy markets," said DeKaser.
The survey covered home valuations during the last three months of 2007, but DeKaser pointed out there's reason to believe that valuations are even more favorable for buyers today.
Price declines have continued into 2008 and interest rates, although they have inched up lately, have been steady or lower compared to late last year. There have even been wage gains; personal income rose 0.5% in December. Soaring foreclosure rates have added inventory to many housing markets, depressing home prices further.
The biggest gains in affordability occurred in California, Michigan and Florida, which are areas that have also been some of the hardest hit by foreclosures. Those states registered 43 of the 50 biggest price declines.
Bend, Ore. currently tops the overvaluation list. Home prices there were judged to be about 59% higher than their fair-market value. Miami, despite a median home price decline of 5.7% last year, is the most overvalued big city, by 44%.
All the best bargains were found in Louisiana and Texas. Houses in Houma, La. were under valued by 31.2%, according to the report. Dallas was the most undervalued big city, by 30%.
If you are having difficulty selling your home these tips might be helpful to you. Click on where it says "play".
http://capitalnews9.com/content/living/111535/home-not-selling-/Default.aspx
As always, please let me know how I can help you refinance your existing home or buy your next home.
Ailing/Watch List Lenders:
Please contact me if you'd like to get a second opinion. I'll help in any way I can.
Jeff Kornfeld
jkornfeld@wcslending.com
**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.
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.
Blogs don't need to be lengthy to say a lot. I think this short list tells it all.....
9 ways to ruin Your retirement
1) Buy more house then you can afford.
2) Base your projections on today's costs.
3) Raid your 401K or cash it out.
4) Count on Social Security.
5) Believe your benefits will never change.
6) Allow your kids needs to trump yours.
7) Count on your partner's income.
8) Plan to work forever.
9) Don't worry about health issues.
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