FHA loan limits go back up to $729,750 in Irvine

In an effort to support prices of expensive homes, Congress has voted to increase the FHA loan limit to $729,750 through the end of 2013.

Irvine Home Address … 3531 PECAN St Irvine, CA 92606

Resale Home Price …… $639,900

Cheap is small and not too steep

But best of all cheap is cheap

Circumstance has forced my hand

To be a cut price person in a low budget land

Times are hard but we'll all survive

I just got to learn to economize

I'm on a low budget

I'm on a low budget

The Kinks — Low Budget

When the conforming limit for GSE and FHA loans went down in October, borrower spending power went down with it. In response to the dramatic drop off in demand, Congress has voted to increase the FHA loan limit back to $729,750 through 2013.

Congress votes to raise FHA loan limits

By Margaret Chadbourn

WASHINGTON | Fri Nov 18, 2011 2:43pm EST

(Reuters) – The U.S. Congress on Thursday approved a bill to raise the maximum size of mortgages the Federal Housing Administration can insure and sent it to President Barack Obama to sign into law.

The measure would push the so-called FHA conforming loan limit in the highest-priced real estate markets back up to $729,750 through 2013, from $625,500, a sign of lawmaker concern over the still-depressed state of the housing sector.

It's far more than a sign of concern, it's an acknowledgement of the weakness in the market for high wage earners, a market that didn't used to get government support.

The FHA has been perverted. It used to provide home ownership opportunities for low and middle income Americans. It was never intended for supporting overpriced markets dominated by high wage earners like here in Irvine. Markets with prices requiring loans over $417,000 are supposed to be supported by savings and equity from previous sales. Since most Americans have no savings, and since home equity has been largely wiped out in the crash, the markets for high wage earners are looking for the government to bail them out.

This policy will undoubtedly cause more FHA losses because prices will continue to decline, and with the tiny down payments on FHA loans, borrowers will go underwater and many will strategically default. In short, this policy will shift losses from the private lenders and investors to the taxpayer — to you.

The limits, which vary from market to market, were temporarily raised for FHA and Fannie Mae and Freddie Mac during the financial crisis when banks became reluctant to lend. They automatically dropped back on October 1.

Lawmakers decided not to raise the loan level for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), which have soaked up about $169 billion in taxpayer aid, as they sought to strike a balance between supporting the market and starting to shrink the government's housing footprint.

The only silver lining to this policy is that it does not apply to GSE loans. It creates an unusual situation where FHA loans will proliferate despite their higher costs due to the FHA insurance.

Many buyers who don't have a 20% down payment (or who aren't willing to put that much down) can now bid up prices using FHA loans assuming they have the qualifying income. This will be an advantage to high wage earners who haven't saved much.

Of course, it is another government prop, and when it is removed, the artificial demand it creates will disappear with it, so buyers thinking of using this financing should beware.

Seeking to avoid a polarizing debate, members of the House and Senate decided to link the mortgage measure to must-pass legislation that includes funding for a large swath of federal programs, from food inspection to law enforcement.

The bill passed the Republican-controlled House of Representatives on a 298 to 121 vote, and passed the Senate by a vote of 70 to 30.

This was “must pass” legislation, so that washes their hands of responsibility, right? Political posturing is bullshit. These idiots just passed a measure which will certainly result in major losses to the FHA — the same FHA facing a government bailout soon. This is a stealth bank bailout nobody has the courage to take responsibility for.

FHA, which does not make loans, provides mortgage insurance to borrowers without enough of a down payment to qualify for prime loans. With an FHA loan, home buyers can put down as little as 3.5 percent.

The agency, which is mainly funded through insurance premiums it brings in, backed about one-third of loans used to purchase homes last year.

FHA, Fannie Mae and Freddie Mac have seen their share of the mortgage market swell as private lenders retrenched; they now back about 90 percent of all new residential loans.

The measure to raise the FHA loan limits still has to pass the Senate before becoming law; Senate approval could come as early as Thursday night with lawmakers laboring against a November 18 deadline, when current government funding expires.

The Obama administration and many lawmakers of both parties want to reduce the government's role in supporting the housing finance system, and the White House sees expiration of the higher loans limits as a first step.

Some Republicans splintered from their party's general consensus that the government should no longer risk the cost of subsidizing home loans on a grand scale. Lawmakers from states with pricey real estate markets, such as California and New York, argued that withdrawing support could hurt the market.

California Republicans should hide their faces in shame. This is appalling. These Republicans call for reducing the footprint of government and simultaneously vote to keep the house prices inflated in their districts with more government largess.

The housing industry and consumer advocates mounted an intense lobbying effort to convince officials the time was not yet ripe to reduce government support.

The NAr will always argue for more government support. The mistake was made by the congressmen who listened to them.

Some conservative groups fought raising the loan limits, with the influential Club for Growth warning that the government was distorting the market and impeding a recovery.

Yes, it is distorting the market and impeding the recovery. This is a mistake.

FHA, which traditionally has supported low-to-moderate income households, said on Tuesday that its capital reserves had dwindled over the past year. But it rebutted the contention of some analysts that it will likely need to turn to the U.S. Treasury for a bailout.

(Additional reporting by Andy Sullivan; Editing by Dan Grebler)

The FHA will likely need a bailout despite their assurances to the contrary. As I reported recently, the only way they will avoid a bailout is if the market bottoms shortly and their legions of underwater loan owners do not strategically default. When their market prognostications prove to be wishful thinking, they will go back to congress for a bailout and claim no one could have foreseen the continuing fall in prices. Idiots.

Countrywide encouraged a peak-buying Ponzi

This house illustrates how fortunes are made and lost during a Ponzi scheme. Two owners ago, this property was purchased on 12/13/2004 for $695,000. Only 15 months later on 3/3/2006, the owner sold the property for $853,000 pocketing over $100,000 after commissions for his one year of ownership. That's the fun part.

The owner that followed was the bagholder… or was he. He paid $853,000 but he did it with Countrywide's money. He put nothing down. In fact, Countrywide didn't think that deal was good enough, so five months later, they gave him a new $748,000 first mortgage and a $93,500 HELOC. Then a few weeks later, they increased his HELOC to $187,000 enabling him to pull nearly $100,000 out himself — after only owning the house less than six months.

It isn't hard to see why houses were so popular and why Countrywide went out of business.


This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707



Irvine House Address … 3531 PECAN St Irvine, CA 92606

Resale House Price …… $639,900

Beds: 4

Baths: 3

Sq. Ft.: 2505


Property Type: Residential, Single Family

Style: Two Level, Traditional

Year Built: 1974

Community: Walnut

County: Orange

MLS#: S679920

Source: CRMLS

Status: Active

On Redfin: 9 days


Rare highly upgraded, Turnkey REO in College Park. Double family rooms with fireplace. New Carpet and Paint, Newer cabinets with granite counters in kitchen and baths, Newer dual-pane windows, crown molding and much more. This home has a large open floor plan and has beautiful flooring throughout. This home sits on a large lot with a spa in the back yard. Low HOA dues and no Mello Roos. Hurry with your highest and best offers because this gem will not last long.


Proprietary IHB commentary and analysis

Resale Home Price …… $639,900

House Purchase Price … $489,000

House Purchase Date …. 9/20/2001

Net Gain (Loss) ………. $112,506

Percent Change ………. 23.0%

Annual Appreciation … 2.6%

Cost of Home Ownership


$639,900 ………. Asking Price

$127,980 ………. 20% Down Conventional

4.02% …………… Mortgage Interest Rate

$511,920 ………. 30-Year Mortgage

$123,592 ………. Income Requirement

$2,450 ………. Monthly Mortgage Payment

$555 ………. Property Tax (@1.04%)

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

$133 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$55 ………. Homeowners Association Fees


$3,193 ………. Monthly Cash Outlays

-$397 ………. Tax Savings (% of Interest and Property Tax)

-$735 ………. Equity Hidden in Payment (Amortization)

$179 ………. Lost Income to Down Payment (net of taxes)

$100 ………. Maintenance and Replacement Reserves


$2,340 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,399 ………. Furnishing and Move In @1%

$6,399 ………. Closing Costs @1%

$5,119 ………. Interest Points

$127,980 ………. Down Payment


$145,897 ………. Total Cash Costs

$35,800 ………… Emergency Cash Reserves


$181,697 ………. Total Savings Needed


12 thoughts on “FHA loan limits go back up to $729,750 in Irvine

  1. Pwned

    This says more about the state of our corrupt political system than it does about the housing market. Score another one for the banks! They truly deserve kudos for that lobbying win. The sad part is I would’ve been surprised if the ceiling hadn’t been raised again.

    1. wheresthebeef

      Yes, it’s pretty clear that the corrupt puppets in Washington answer to the lobbyists for the powers that be. With a 10% approval rating, Congress could care less about making decisions that will be good for the country from a financial standpoint.

      The majority of these turds will get voted right back in!

  2. Soylent Green Is People

    Huge resistance to raising the GSE limits. Congress wants the Agencies gone as soon as possible. They carved out the GSE limit increase from the whole legislation, a clear signal that the GSE’s aren’t going to get higher limits anytime soon.

    I’m OK with a higher FHA limit, but not if they continue to have such loose guidelines. A 620 FICO and a 48-50% DTI is A-OK with HUD (enough abbreviations for you?) which is mind numbing. Ratchet up the scores and lower the DTI and you’ll get high quality, low risk buyers. Had a $350kpy newly minted Doctor contact me last week. He had 10% down, perhaps 15%, but not 20% on a $800k home, a perfect candidate for a high balance FHA loan. If more of these borrowers were approved and less of the dregs, FHA wouldn’t be in the position it’s in today.

    My .02c

    1. forouz

      I’m one of those new doctors. >400kpy salary but with student loans and saving 20-40% for down payment, I won’t be in the market til late summer/early fall 2012 or beyond. Wife not too happy to live in apt longer but she understands. Can’t predict the bottom of the market but many have mentioned, there is probably 10-20% correction at the high end still needed (which would wipe out my dp if I bought now). Personally, I would never do FHA loan.

      1. dr dupont

        Small world. I started my own practice last year. P&L looks good despite the economy. I paid taxes on about 870K last year. Still renting though I am buying investment properties and have my eyes on a restaurant buyout. Wife is fine with it.

  3. Mark

    Precisely what the housing market needs!

    Just when the sickly patient was about to get off his gurney and stumble out the doors of Sunnyside rehab, Washingdumb offers him a “freebie” to pep him back up.

    Smiling Congressman to zombie debt patient: “Man, thank goodness we arrived! Where would you be without us”?

  4. Alan

    “California Republicans should hide their faces in shame.”

    I’m surprized that you’re surprized. Republicans have obviously jumped on the debt reduction issue as a political tool to make Obama a 1-term president specifically, and reverse Democrat gains generally, no matter what the cost to the country and anyone less than the super-rich. Look at where most of the deficit came from (Republican presidents and policies which bothered them not a bit at the time), and not what they say now. Or, check out the actual chance of Ron Paul to get the Republican nomination.

    Republicans control the House, and if they wanted to block government help for rich people buying overpriced houses and some hidden flow of money to the banks they certainly would have. Too bad the Democrats aren’t clever enough to pick up the fiscal responsibility baton when it has been dropped. It’s a Bush tax cut issue now – none of them has the guts to kill it, just keep extending it time after time until some magical future moment when “the time is right”.

    1. IrvineRenter

      “Too bad the Democrats aren’t clever enough to pick up the fiscal responsibility baton when it has been dropped.”

      Yes, this could have been a defining moment for Democrats when they got back on the correct side of an issue which has dogged them for decades. Instead, they gave us more of the same. What we have now is neither party truly cares about fiscal responsibility. They only care about diverting government money to the constituency that gives them the most campaign contributions. There is no principled governance any longer. I foresee a massive increase in government spending, an ever-expanding federal budget, and more government debt and printing money to pay for it all.

      Andrew Jackson is rolling over in his grave.

      1. theyenguy

        In my linked article Stocks Rally Strongly As Wolfgang Schaeuble Says The Goal Of The EU States Is A Stability Union, I relate Neoliberalism’s ponzi lending has reached its extreme — credit has reached its full expansion. Sovereign insolvency means the end of ponzi financing and the beginning of debt servitude.

        We are witnessing the last vestige of the minting of money as the Milton Friedman Free To Choose Regime is history. In this regime, bankers, and government ministers waived magic wands of finance and created wealth. What we are seeing is only zombie financing.

        The Beast Regime of Neoauthoritarianism is rising out of the Mediterranean Sea profligates, Italy and Greece. In this regime, bankers and government ministers waive clubs and beat people into debt servitude.

  5. SanJoseRenter

    > Congress has voted to increase the FHA loan limit to $729,750 through the end of 2013.

    I guess Washington can and will do anything to re-inflate bubble pricing.

    Foreclosure auction pricing shows that without easy credit, Cali house prices would be almost half.

    You have to wonder what BofA executives were thinking when they bought Countrywide. BofA had experience with dozens of mergers, yet made 2 huge investments in a steaming pile.

    A female correspondent on NBR last week was asked, “BofA shares have declined. What is the risk in buying BofA shares?”

    She replied, “None, since BofA is too big to fail.”

    I wanted to throw up.

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