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When will the New Fannie Mae/Freddie Mac Conforming Limits be Announced?
March 4th, 2008 categories: Real Estate Finance, Real Estate News
This is the central question that I and most in my industry spend a lot of time responding to these days. President Bush signed the Stimulus Package into law on Wednesday, February 13th, 2008–almost three weeks ago. And yet, no new limits have been announced as of yet.
We do know that the Stimulus Package recommends increasing the conforming limits in select metro areas to 125% of medial home price. Depending on whether or not the North County is included, most agree that the new conforming limit for San Diego County should be the maximum allowable limit of $729,750 or somewhere near.
However, we still do not know when these new limits will be finally announced and once announced, how long it will take for the banks to accept new conforming loans at the higher limits.
If you ask an optimist, the HUD will make their new limit announcements by March 15th. Others on the more pessimistic side argue that the new limits do not have to be announced until the beginning of July and the HUD may well take its time.
Also of question is whether the new conforming limits will affect the conforming limits for duplexes, triplexes, and also fourplexes. Currently properties with 2 to 4 units have higher conforming limits than single family limits. It is unclear if these limits will raise in accordance with a higher single family conforming limit.
What is clear is the new increase will be temporary. Currently the Stimulus Package only allows for the new limits through the December 31, 2008. Also clear is that many lenders are still in trouble. There was more bad news today reminding us that even Citigroup remains in serious trouble with continued exposure to subprime mortgage investments.
If the credit markets tighten further, we may see continued belt tightening and more restrictive qualifying guidelines. Already, there are no longer any 100% financing programs available and it looks like loans requiring only 5% down payment have their days numbered.
I have been saying for quite a while now that there is a favorable intersection of great deals to be had in the market place and attainable financing with low interest rates. I believe that even more now.
Last week we saw the removal of almost all non-owner occupied saleable jumbo loans. If you own an investment property with a jumbo mortgage and need to refinance, you will need to work with a portfolio lender rather than a bank that sells their loans on the secondary market as there are no buyers currently for those loans and therefore no loans offered.
We are also seeing lenders freeze existing Home Equity Lines of Credit, re-appraising properties, and forcing borrower’s to re-qualify on for their existing Home Equity Line. What do I mean exactly?
Say you have a line of credit with Bank of America on your home for $150,000. Let’s say you currently have $50,000 used and you sleep peacefully at night knowing that you could always draw down the remaining $100,000 if you need it, right? Well Bank of America has the right to freeze your line of credit and reduce your limit down (in this case to $50,000) and you would no longer have any available credit left.
Should you panic? No, but if you think you need to access your unused credit line in the near future, you may consider proactively drawing the line down and putting the money in your bank account.
We are in a very volatile market. No one knows if rates will go up or down but inflation is looming as the green eyed monster on the horizon. If inflation continues to be a problem, mortgage rates will rise as bond investors will not want to invest their money in a long term investment if they fear their investment will devalue over time.
Again, I recommend evaluating your situation and taking action sooner rather than later. If you are consider refinancing, do so now while rates are favorable, and credit still available. If you are considering purchasing a home with 10% or less down, start looking now. Lending is returning to the old guidelines: 20% down. It may be a quick trip or take a little time but the trend is for banks to require more down payment.
Call me or your mortgage professional to discuss your options. You can still find jumbo non-owner occupied financing but it will not be with Bank of America or Washington Mutual. You can still purchase a home with as little as 5% down but you need to work with someone who understands the current and ever changing market.
Once the new conforming limits are announced, we should see a little ease on guidelines for loans up to $729,750 but this maybe only a window in time. Make sure you are in a position to take advantage of that window. Remember, lenders will most likely be flooded with new loan applications. Starting now will ensure that your loan is at the start of the line.
Lysa Catlin
CMC Finance, Inc.
(858) 456-3000
