George's Blog

House Passes Housing Stimulus Bill HR3221 CONFORMING LOAN LIMITS GO DOWN

BAD NEWS FOR CALIFORNIANS AND OTHER HIGH COST AREAS!

This bill is over 700 pages, very comprehensive and very complex. I won’t go into all the details now, except the most important one, that is the current temporary conforming loan limit of $729,750 which is due to expire on Dec. 30, 2008, will be replaced with a LOWER limit of $625,500. That’s great, huh? The conforming loan limit is the maximum loan amount that Fannie Mae and Freddie Mac will buy, and FHA will insure, and is very important because even with all the recent financial turmoil that they have had, they are still the most dependable source of mortgage loan funds available right now.

The temporary loan limit increase to $729,750 occurred earlier this year in emergency economic stimulus package. Because it was only temporary, it is actually a two tiered pricing system- the regular conforming loans up to $417,000 (the old conforming limit), and "conforming jumbo” loans from $417,001-729,750. A whole new secondary market had to be established for the new confumbo loans, with new mbs (mortgage backed securities) instruments created, and whole new set of underwriting guidelines, as well, resulting in a lot of confusion and limited utility to the consumers it was meant to help.

The new loan limit was the result of intense negotiation between the House and Senate. Representative Barney Frank, the Chairman of the House Financial Services Committee, was a very strong advocate for making the temporary limits permanent, but ultimately lost to powerful Republican members of the Senate Banking Committee, who originally wanted only a $550,000 limit, but settled on $625,500. The California Congressional Delegation, lead by Senators Boxer and Feinstein, and Members Gary Miller, Ellen Tauscher, Maxine Waters and Brad Sherman fought valiantly on behalf of California consumers, with Representatives from other high cost areas, but lost out to powerful conservatives from the Midwest on this issue.

WHAT THIS MEANS TO CALIFORNIANS-

If you currently have a loan over $625,500, and have been considering refinancing it, then DO IT NOW. You have until Dec. 30^th to get the loan closed at the lower rates, then you are in Jumbo territory, and the rates are in the high 7’s range, with much stricter underwriting guidelines, and less choices. Also, all the rates have been going up in the last 2 weeks, under fears of inflation, the longer you wait, the worse the rates could get.

If you are thinking about purchasing a home, now is a great time because values have dropped, but that benefit could be negated by the higher rates. Like Bobby Weir said “can’t win for losin”.

The window is closing!!

George Duarte

The “Real Deal Guy” (sm)