Stimulus Saga

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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 limit is $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 median house price in 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.

You
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.

Exceptions
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.  That tells me a storm is brewing. 

What Guidelines?
Fannie and Freddie will establish the guidelines to tell mortgage lenders what criteria a buyer has to meet in order to qualify 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.

Vicki Moore About Vicki Moore

Office:
RE/MAX Star Properties
282 Redwood Shores Parkway
Redwood Shores, CA 94065

By Phone:
650.888.9268

Comments

  1. Great outline of the problems coming down the pike and distilling it for the non-realtor.

  2. Vicki Moore Vicki Moore says:

    Thanks Lenore. I appreciate that. It’s confusing for everyone.

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