Stimulus Saga

Learning Curve
We’re all learning as we go. None of us experts have experienced an increase in the conforming loan amount. So there’s a procedural learning curve. Here’s the scoop:

As you’ll remember, the current conforming loan amount limitis $417,000. The stimulus package that was signed by the President included an increase in that maximum; however, the increase up to $729,000 is not a flat across-the-board increase throughout the U.S. It’s calculated based on the medianhouse pricein each Metropolitan Statistical Area (MSA). Five MSA’s with the max of 729k have been determined; all of them in California.

In order for you, the borrower, to get the best rates, loans must meet certain guidelines to qualify as Freddie Mac and Fannie Mae approved. Freddie and Fannie must have those new conforming loan regulations finalized by March 15, 2007.

San Mateo County will see a conforming loan amount of $729,000. But when? CitiBank, one of the largest lenders in the country, will supply the new guidelines to mortgage brokers and their clients by July 31, 2007. Yes, you read that right. July 31. There are no governmental requirements as to when specific lenders must have these guidelines implemented.

This increase in conforming loan amount will not just be for new purchases. Current home owners who bought a home as far back as July 2007 will be able to take advantage of this increase.

Previous to the increase, there were two exceptions to the $417k maximum conforming loan; Alaska and Hawaii. Now there will be 29 exceptions. Imagine for a moment what the staff at Fannie, Freddie and various lenders and mortgage companies will be going through in the next few months. They’re understaffed. They’ve cut the number of employees to the bone because of the mortgage meltdown. Washington Mutual is hiring as fast as possible,guaranteeing that there will be 50 to 60 hours of work per week.Thattells me astorm is brewing.

What Guidelines?
Fannie and Freddie will establish the guidelines to tell mortgage lenders what criteria a buyer has to meet in order toqualify for the jumbo lite loan. The mortgage lenders will then determine what additional criteria they will require. And you’d better believe it’s going to be restrictive. Lenders are already inspecting your loan applications, accompanying documents, the status of the market,and appraisals with a magnifying glass.They’re going to be even more critical because the loan product is new. Those first through the funnel are going to be the guinea pigs. They’re going to run you and your mortgage broker ’round that wheel until you yell for mercy.

Bottom Line
Jumbo lite loans (loans between 417k and 729k) are not going to have interest rates as low as standard conforming loans (up to 417k); however, the rates will be lower than a straight jumbo (over 729k).

Inventory is declining.

Get pre-approved now. It’s more important now than ever.

One more thing: Get a reputable mortgage broker from a reliable company. It will matter.

The Prez

President Bush signed the stimulus package we had been hoping for. The uproar in the Senate subsided and the package cleared with the housing piece included.

So what does it mean?
Freddie Mac and Fannie Mae are now allowed to increase the conforming loan limits from $417,000 to a maximum of $729,750. The significance is that Fannie and Freddie’s conforming loansoffer lower interest rates and are backed by government-sponsored companies.

What’s the dif?
There are two types of loans: conforming and jumbo. Currently conforming is a loan under $417,000; jumbo is anything over. Jumbo loans are typically 1% point morein interest ratethan conforming. In an expensive area like San Mateo County, it makes it more difficult for buyers to buy.

Time’s a-changing
We’re currently waiting for the new guidelines to be made available. They could come out as soon as next week. Once that happens, I expect that we’ll see a rapid change in the local market.

This increase in the conforming loan maximum may only be valid until December 31, 2008, depending on the overalleffect of the change.

Update of stimulus package released today by the California Association of Realtors

“Thanks in part to the lobbying by C.A.R. and NAR members; the Senate passed their version of an economic stimulus package on Thursday, February 07, 2008. The Senate version expands rebate checks for seniors and disabled veterans and includes the same increases to the conforming loan limits for both GSE and FHA found in the House stimulus package.

The House has already announced that they plan to vote on the Senate version of the stimulus package and expect to quickly pass the stimulus package with a bipartisan vote. The President is expected to sign the legislation early next week, ahead of the Congressional self-appointed deadline of February 15.

The increase in the conforming loan limits will last through 2008, but the California Association of Realtors and National Association of Realtors continue to lobby for FHA and GSE reform, making these increases permanent.

The U.S. House of Representatives passed a stimulus package last week that raised the FHA and conforming loan limits to as high as $729,750 in high-cost areas.

By increasing the loan limits, borrowers will see immediate relief with new liquidity in the mortgage market and the nation will see an additional 300,000 home sales.

Research shows that an increase in the FHA limit would enable an additional 138,000 Americans to purchase homes, and 200,000 families to refinance their homes safely and affordably.Increasing the FHA loan limits is critical to bolstering California.”