Government-backed loan limits may go back up

The Senate passed a measure that would increase the loan limits on federally guranteed loans back to $729,750. Now it's up to the House of Representatives to decide.

Irvine Home Address … 50 EAGLE Pt Irvine, CA 92604

Resale Home Price …… $285,000

A circumstance beyond our control, oh oh oh oh

The phone, the tv and the news of the world

Got in the house like a pigeon from hell, oh oh oh oh

Threw sand in our eyes and descended like flies

Put us back on the train

Oh, back on the chain gang

Pretenders — Back on the Chain Gang

Every time politicians do the right thing and allow the housing market to wean itself off subsidies, pressures from loan owners prompts them to change their minds. We're being put back on the train leading to temporary market supports which merely delay the recovery.

In the latest dumb move from Washington, the Senate passed a bill which would raise the federally guaranteed loan limits back to $729,750. Apparently, private money is too expensive and somewhat risk adverse — as they should be — so lenders and loan owners are turning to the government to assume this risk and pay for the inevitable losses.

Right now, it's up to the House of Representatives to decide if they want to act on the Senate bill. It faces an uphill battle in the Republican House — thankfully. I suspect it will not pass.

Donovan on Loan Limits: Let’s ‘See What the House Decides’

By Alan Zibel — November 2, 2011, 4:03 PM ET

When it comes to dealing with Congress, the White House’s latest slogan is, “We can’t wait.”

But when it comes to lifting federal mortgage caps, the message seems to be, “You decide.”

Back in February, the Obama administration called for a decline in the maximum size of government-backed home loans as a way to start drawing back federal support for the nation’s mortgage market. They dropped on schedule on Oct. 1 but now a movement is afoot to revive the higher limits to support the ailing housing market.

Obama showed the courage to do the right thing despite pressures from the extreme left. He lacks the courage to say no to this bill, and he is hoping the Republicans in the House will kill it and take the heat for him.

Housing and Urban Development Secretary Shaun Donovan said in an interview Wednesday that while administration officials want to reduce the government’s support of the housing market “in the long run,” they also understand the need to support a weak part of the economy.

I wish I understood the need to support a weak part of the economy. It makes no sense to me at all. The housing market will support itself once prices find their natural bottom and the toxic debt is replaces with stable loans with much smaller balances and payments.

“We have to make sure that we’re taking these steps in concert with what’s happening in the market and ensuring that we’re supporting recovery,” in housing, Donovan said. “Obviously that’s the debate that Congress is having… Honestly, we’ll have to see what the House decides. We haven’t weighed in on it…I don’t think this changes the long-term view that we have” about reducing government support for housing.

Obama is trying to steer clear of this issue to avoid angering his left-wing base, but he clearly does not want to see this loan limit raised again, or he would openly support this measure.

Lobbyists for real-estate agents and other housing and mortgage industry groups are pushing on Capitol Hill to restore higher limits on the maximum size of home mortgages that can be guaranteed by Fannie Mae, Freddie Mac and the Federal Housing Administration.

They argue that the housing market is too weak for the U.S. government to withdraw its support for more expensive loans. The loan limits fell to $625,500 on Oct. 1 in expensive markets such as New York and San Francisco from $729,750. A spending bill passed by the Senate earlier this week would lift those limits until the end of 2013.

The NAr is wining and dining politicians to restore supports which they incorrectly believe are good for their incomes. Realtors would be much better served by allowing the market to clear. Transaction volumes would rise, and despite the lower prices, realtors would generate more commissions and make more money. They are arguing against what is in their own best interest, but they are too ignorant eo see it.

In the House, the issue of raising loan limits has emerged as a point of contention among Republicans, and one that puts House Speaker John Boehner (R., Ohio) in an awkward position.

Mr. Boehner is under conflicting pressures on the issue. Republicans in high-cost areas such as California and New York want to lift the limits. Others such as Rep. Scott Garrett (R., N.J.) and Rep. Jeb Hensarling (R., Texas) argue that raising the loan limits is equivalent to endorsing the unpopular and expensive bailout of Fannie Mae and Freddie Mac.

Any increase in the conforming limit will increase the losses at the GSEs and will serve as a bailout to the banks. When the conforming limit was high, banks could offload their toxic crap through purchase or refinance to the GSEs. Once the conforming limit dropped, banks were stuck with their remaining bad loans.

In February, the administration endorsed allowing the loan limits expire on schedule. And at an event in June, Bob Ryan, a top HUD housing policy adviser, said allowing the loan limits to drop would be a “reasonably modest pullback.”

However, the housing market and the broader economy are in a weaker state than economists expected at the start of the year.

Noted housing-market experts such as Ivy Zelman, chief executive of Zelman & Associates, and Mark Zandi, chief economist of Moody’s Analytics, have said it was a mistake to let the limits drop.

Lawmakers adopted the higher limits in 2008 after private lenders pulled back from making “jumbo” loans, which are loans above the federal mortgage caps.

I haven't read where Ivy Zelman said dropping the conforming limit was a mistake. It clearly was not a mistake. It quite predictably lowered high end prices and contributed to the ongoing weakness in the housing market. What people fail to recognize is that this price correction is a necessary and health-restoring process the market must go through.

Larry Roberts and Shevy Akason are hosting an OC housing market presentation at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618) on November 9, 2011. Please RSVP at sales@idealhomebrokers.com. Register online here: OC Housing Market – Intercap Lending.

2002 rollback

The asking price of today's featured proeprty is just above its 2002 purchase price. When commissions and negotiating room is factored in, this will be a 2002 rollback.

  • The owner paid $270,000 on 9/26/2002 using a $216,000 first mortgage and a $54,000 down payment. She went Ponzi shortly thereafter.
  • On 6/16/2003 she borrowed $221,000 with a new first mortgage.
  • On 5/9/2005 she obtained a $105,000 stand-alone second.
  • On 1/13/2006 she finished with a $200,000 HELOC.
  • Total property debt is $421,000.
  • Total mortgage equity withdrawal is $$205,000. She nearly doubled her mortgage debt in three and one-half years.

All the Ponzis will be flushed from the system before the crash is over. Each of them crossed the Ponzi threshold and became dependant upon mortgage equity withdrawal to make ends meet. Now that lenders aren't giving out free money, these loan owners cannot make ends meet and cannot afford their houses.

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This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 50 EAGLE Pt Irvine, CA 92604

Resale House Price …… $285,000

Beds: 3

Baths: 2

Sq. Ft.: 1135

$251/SF

Property Type: Residential, Condominium

Style: Two Level, Contemporary

Year Built: 1978

Community: Woodbridge

County: Orange

MLS#: Y1106555

Source: SoCalMLS

Status: Active

On Redfin: 2 days

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FIRST FLOOR. THIS CONDO HAS AN EXTRA BATHROOM. TITLE FLOORS. GREAT WOODBRIDGE COMMUNITY. WALKING DISTANCE TO THE LAKE. CLOSE TO FYW 5 and 405. IT HAS A NICE SIZE PATIO. THIS IS A SHORT SALE PROBATE.

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Proprietary IHB commentary and analysis

Resale Home Price …… $285,000

House Purchase Price … $270,000

House Purchase Date …. 9/26/2002

Net Gain (Loss) ………. ($2,100)

Percent Change ………. -0.8%

Annual Appreciation … 0.6%

Cost of Home Ownership

————————————————-

$285,000 ………. Asking Price

$9,975 ………. 3.5% Down FHA Financing

4.18% …………… Mortgage Interest Rate

$275,025 ………. 30-Year Mortgage

$90,633 ………. Income Requirement

$1,342 ………. Monthly Mortgage Payment

$247 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$59 ………. Homeowners Insurance (@ 0.25%)

$316 ………. Private Mortgage Insurance

$377 ………. Homeowners Association Fees

============================================

$2,341 ………. Monthly Cash Outlays

-$211 ………. Tax Savings (% of Interest and Property Tax)

-$384 ………. Equity Hidden in Payment (Amortization)

$15 ………. Lost Income to Down Payment (net of taxes)

$56 ………. Maintenance and Replacement Reserves

============================================

$1,817 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$2,850 ………. Furnishing and Move In @1%

$2,850 ………. Closing Costs @1%

$2,750 ………… Interest Points @1% of Loan

$9,975 ………. Down Payment

============================================

$18,425 ………. Total Cash Costs

$27,800 ………… Emergency Cash Reserves

============================================

$46,225 ………. Total Savings Needed

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Larry Roberts is hosting a Las Vegas cashflow properties presentation at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618) on November 9, 2011. Please RSVP at sales@idealhomebrokers.com. Register online here: Las Vegas cashflow property – Intercap Lending.

21 thoughts on “Government-backed loan limits may go back up”

  1. OBAMA ADMINISTRATION RELEASES OCTOBER HOUSING SCORECARD

    WASHINGTON- The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury today released the October edition of the Obama Administration’s Housing Scorecard – a comprehensive report on the nation’s housing market. The latest housing data offer continued mixed signals as new home sales rose compared to August, but were still slightly down from the prior year. Mortgage defaults and foreclosure sales continued a downward trend as more homeowners were able to secure mortgage relief. However, foreclosure completions ticked slightly upward in September after months of decline.

    Also, beginning this month the Housing Scorecard will capture data on the Administration’s Home Affordable Refinance Program (HARP). The Federal Housing Finance Agency recently announced efforts to ease refinance guidelines for homeowners. The full report is available online at http://www.hud.gov/scorecard.

    HUD Assistant Secretary Raphael Bostic said “The housing data in this month’s Scorecard illustrate how complex the market is and why the Obama Administration has chosen a variety of approaches to help spur recovery. Last month we saw a continued fall in mortgage defaults, due in part to our foreclosure prevention programs reaching more borrowers upstream in the process. And in the last quarter, a million more homeowners refinanced their loans under some of the lowest interest rates in history. But despite these signs of progress, we have much more work to do to reach the many households who still face trouble and to help the market recover. To help responsible homeowners, we have to make it easier for people to refinance at interest rates that are now near 4% – putting hundreds of dollars in real savings back in their pockets each month, and giving a boost to our fragile economy.”

    “The Administration’s programs continue to provide some of the most sustainable assistance available to tens of thousands of struggling homeowners every month,” said Treasury Assistant Secretary for Financial Stability Tim Massad. “The standards we have set are changing the industry and indirectly helping millions of additional families.”

    The October Housing Scorecard features key data on the health of the housing market and the impact of the Administration’s foreclosure prevention programs, including:

    The Administration’s recovery efforts continue to help millions of families deal with the worst economic crisis since the Great Depression. More than 5.3 million modification arrangements were started between April 2009 and the end of September 2011 – including more than 1.7 million HAMP trial modification starts, more than 1,064,000 FHA loss mitigation and early delinquency interventions, and more than 2.5 million proprietary modifications under HOPE Now. Many of these modifications are a direct result of the standards and processes the Administration’s programs have established. While some homeowners may have received help from more than one program, the total number of agreements offered continues to more than double the number of foreclosure completions for the same period (2.3 million). More than 850,000 homeowners have received a HAMP permanent modification to date, with a median payment reduction of over $520 each month.

    Even as new delinquencies continue to fall, eligible homeowners entering HAMP have a high likelihood of earning a permanent modification and realizing long-term success.Eighty percent of eligible homeowners entering a HAMP trial modification since June 1, 2010 received a permanent modification, with an average trial period of 3.5 months. After six months in the program, more than 94 percent of homeowners remain in their HAMP permanent modification. Homeowners in HAMP permanent modifications have saved an estimated $8.8 billion to date. View the September MHA Servicer Performance Report.

  2. South Florida leads nation in past-due mortgages, report shows

    By TOLUSE OLORUNNIPA
    tolorunnipa@MiamiHerald.com

    Florida had the nation’s highest rate of non-current mortgage loans in September, according to a report released Tuesday by Jacksonville-based mortgage data firm Lender Processing Services.

    Nearly 23 percent of mortgages in the state are past due, almost double the national rate of 12.3 percent. In Florida, 14.2 percent of loans are stuck in foreclosure, nearly double the rate of the next highest state and triple the national rate. Additionally, another 8.7 percent of Florida mortgages are delinquent on payments.

    The rate of new problem loans—those that were current six months ago but are now seriously delinquent—is 2.4 percent in Florida, compared to 1.6 percent nationwide.

    According to LPS, it now takes an average of more than 700 days to foreclose on a home in judicial states like Florida.

    Read more: http://www.miamiherald.com/2011/11/02/2484570/south-florida-leads-nation-in.html#ixzz1d2apjlWC

    1. 700 days. INSANE.

      South Florida is where I grew up and where my parents, siblings, and in-laws live. For a while there have been lots of pretenders. If you don’t have to pay your overpriced mortgage for 2 years, you can keep living it up the way the heloc used to support.

  3. “short sale probate”

    haven’t seen that before.

    Shame on you IR, for making fun of someone clearly laid low by medical expenses. It wasn’t their fault!!!!!

    1. I had never seen that before either. If this part of a deceased person’s estate, I wonder how the short sale will impact that.

  4. need advice:

    If I am purchasing a home that is a short sale, when does the owner typically vacate the premises, before closing, after closing? What is standard procedure in California?

    Any suggestions on what would be recommended to protect the buyer’s interest…

        1. It is whatever you negotiate, but very typically 1 to 3 days.

          3 days makes them not rush to get out after closing. Happy sellers means (usually) less damage, and better karma.

          Give ‘em a week if you feel so inclined. In the big scheme of life, it’s not going to matter to you, but it might help them out.

          Chuck

  5. I encourage all constituents of John Campbell (Irvine & Newport Beach) to contact him and encourage him to vote NO on raising the FHA loan limit. He likes to prattle on about how we need to reign in government spending and that he’s all for a free market, yet he is in favor of elevating the loan limit. Classic double speaking politician.

      1. Here was my email to him:

        I believe you support raising the conforming loan limit to $729,750. I don’t want to see my tax dollars go to subsidizing the mortgages inflating house prices were high wage earners live. You claim to be in favor of smaller government and less subsidies, but you favor this huge government subsidy. I understand many local constituents probably endorse this hypocrisy because it serves their interests. It still doesn’t make it right. Have the courage to stand up for your free market convictions and allow the conforming limit to work its way back to $417,000.

        While you’re at it, support lowering the home mortgage interest deduction limit to $500,000. Taxpayers have no business subsidizing $1,000,000 mortgages.

        1. What’s the electronic equivalent of the “circular file cabinet”? Because, that is where your email will end up…..unfortunately.

        2. How much money have you donated to John Campbell?

          If this answer is nothing, best of luck to you. It’s obvious who has donated money to him.

          You have to be a fool to think the conforming limit would not be kept high.

          Your mortgage interest deduction request was a total waste of time.

          Sorry to announce the sad reality.

        3. Thank you for sending that email. I sent a similar one.

          One can sign up for his “Lap Top Report” and he will email subscribers periodically. The Report is informative and responding back to it is easy.

          His September 29 Report is where he discloses his communist viewpoint on housing. The Report contains this gem:

          “No one likes the current system of housing finance. We need to protect the taxpayer more, create many more purchasing options and engender private sector involvement. But, until we replace the current housing finance system with a better one, we should not make what we have worse. I hope we can restore these conforming loan limits in the next month or so before too much more damage is done to the economy.”

          He is a classic fiscal Augustine: “Lord, make me [fiscally] prudent, just not yet!”

  6. Listing today is a townhouse thingie, with $377/mo in total HoA fees.

    It’s 33 years old, so prolly needs a new interior, but $285,000 is not too bad if you really want to live in this area of Irvine.

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