Thursday, January 24, 2008

South Bay-Beach Cities: Conforming Loan Limits to Increase

The House Republicans and Democrats with the approval of the Treasury have tentatively agreed to increase conforming loan limits to $625,000 from the current level of $417,000 as part of their economic stimulous package. The bill must still be approved by the Senate ans the White House before it becomes law. Speculation is that the bill will be signed and could impact loans as soon as February 15, 2008.

If the package goes through it would be a boost for the jumbo loan market and our South Bay-Beach Cities real estate market. The increase would be great for those who need to refinance and for many buying property at $900,000 or less. Loans up to $729,750 would get the same treatment as conforming loans of $417,000 or less now receive.. that is lower rates.

Brian Brady in a post this morning before the news from Washington hit the headlines thinks that rates may be headed higher instead of lower after The FED meets next week. He may be right.. if the markets don't like the FED cuts in the discount rates.. either too much or too little then the Bond market will be dicey.. and mortgage rates will be up for grabs. I know it's crazy but it's the market.

**** Looks as if the deal has been done and we can expect the president to sign as soon as it officially clears the Senate. BE AWARE.... These rates are only good for one year.. so if you need to refinance now is the time to do so...


Anonymous said...

2 hurdles to overcome:

1. If you are underwater, you won't be refinanced.

2. If you originally qualified by lying on your loan application, that option is no longer available.

Kaye Thomas said...

You are right. If you are in either position the new limits won't help you.

I would like to think that lenders and borrowers have learned some important lessons but I'm not betting the bank on it..

Taylor said...

GSE's by law cannot do over 80% LTV. they either require 20% down or MI. they also require full income documentation.

also, agency MBS sold off dramatically yesterday on the news that the limit may be raised. the TBA market doesn't want jumbos in conforming pools because it will increase their negative convexity. so the rates on jumbo agency MBS pools will be higher than the original conforming pools.

add to that (a) the fact that the companies are facing capital constraints due to FAS 133 and various other GAAP rules that front load credit expenses; and (b) the fact that lockhart and demarco don't want them in the jumbo market to begin with ...

my conclusion is that the GSE's won't be securitizing large volumes of jumbos anytime soon. 2009 and beyond may be a different story, but that's not going to help the 2008 selling season.

Kaye Thomas said...

Interesting.. thanks for the info..I'm curious about what happens if the upper limit for conforming loans does pass despite Lockhart and Demarco's objections.