Conforming Loan Limits
August 30, 2007
Conforming Loan limits are currently at $417,000. Anything below that is considered conforming and anything above that is considered a non conforming loan amount and is labeled "jumbo."
Right now jumbo rates are significantly higher than those of conforming. That's because Fannie Mae and Freddie Mac agree to purchase loan that are conforming. Of course in order for them to purchase the loan the loans have to meet underwriting guidelines set forth by Fannie/Freddie.
Because there is currently no liquidity in the secondary markets other then that guaranteed by Fannie Mae and Freddie Mac, anything that is not conforming (not going to meet the requirements to be purchased by Fannie Mae and Freddie Mac, has higher interest rates because they have essentially no buyers on Wall Street).
The problem lies in the fact that here in Southern California, a lot of areas have home prices that are higher than the conforming loan amounts. So, it's been suggested in Congress that if the Conforming loan amounts were to be raised, less people would lose their homes because they would be able to refinance into better loans. Since there is no appetite on Wall Street for anything non conforming, the non conforming programs are disappearing and the ones that are still here are pretty restrictive, making it difficult to refinance into a non conforming loan right now. The thing is, right now people need to have the ability to refinance into a fixed loan.
By raising the conforming loan limits, you guarantee a purchaser on Wall Street. You may say that the borrower can't afford the loan but I think you are wrong. People now are losing their homes because the loan is adjusting upwards out of their control. If they could refinane into something fixed, they would be able to budget their monthly income and plan accordingly because the fixed payment would be something they can count on. But when you are adjusting with a max interest rate cap of 12 or 13% you are in big trouble. With how nervous Wall Street is now, we are at a time when things are over tightened because of the general lack of confidence.
Raising the conforming loan limits would significantly prop up the housing market and the mortgage industry which needs at this time some serious help until confidence returns and ultimately liquidity.
Conforming Loan Limits
August 30, 2007
Conforming Loan limits are currently at $417,000. Anything below that is considered conforming and anything above that is considered a non conforming loan amount and is labeled “jumbo.”
Right now jumbo rates are significantly higher than those of conforming. That’s because Fannie Mae and Freddie Mac agree to purchase loan that are conforming. Of course in order for them to purchase the loan the loans have to meet underwriting guidelines set forth by Fannie/Freddie.
Because there is currently no liquidity in the secondary markets other then that guaranteed by Fannie Mae and Freddie Mac, anything that is not conforming (not going to meet the requirements to be purchased by Fannie Mae and Freddie Mac, has higher interest rates because they have essentially no buyers on Wall Street).
The problem lies in the fact that here in Southern California, a lot of areas have home prices that are higher than the conforming loan amounts. So, it’s been suggested in Congress that if the Conforming loan amounts were to be raised, less people would lose their homes because they would be able to refinance into better loans. Since there is no appetite on Wall Street for anything non conforming, the non conforming programs are disappearing and the ones that are still here are pretty restrictive, making it difficult to refinance into a non conforming loan right now. The thing is, right now people need to have the ability to refinance into a fixed loan.
By raising the conforming loan limits, you guarantee a purchaser on Wall Street. You may say that the borrower can’t afford the loan but I think you are wrong. People now are losing their homes because the loan is adjusting upwards out of their control. If they could refinane into something fixed, they would be able to budget their monthly income and plan accordingly because the fixed payment would be something they can count on. But when you are adjusting with a max interest rate cap of 12 or 13% you are in big trouble. With how nervous Wall Street is now, we are at a time when things are over tightened because of the general lack of confidence.
Raising the conforming loan limits would significantly prop up the housing market and the mortgage industry which needs at this time some serious help until confidence returns and ultimately liquidity.
More: continued here
Heading Towards Foreclosure and Don’t Know it yet?
August 27, 2007
There are a lot of things happening in the mortgage business everyday, from guideline and product changes, to banks going flat out of business. There are people who are purchasing homes and have been pre qualified with a bank that might be out of business when they finally find the home they choose to purchase (happened to my clients but don't worry I lined them up with new financing quickly and I closed the transaction just a few days later).
The title of this post might be an eye cather. THat's what it was meant to do. The people who really have the possibility to get in trouble is not necessarily the people I mentioned above, but it's the people who already own homes and have loans that aren't your standard vanilla 30 year fixed. You see a lot of people out there have loans that are fixed for just 2 short years, maybe 3 that are going to have to refinance into a new fixed loan when their short fixed term expires. Once the short fixed term expires, that payment will adjust and let me tell you, the payment will not adjust downward, it will most surely increase at which point it will become more and more difficult to hold on to that home. The problem lies in the fact that since loan guidelines have been so drastically tightened, there is a chance that you may not qualify to refinance into a fixed loan which would effectively make you STUCK with an adjusting payment until easier financing comes along. I've talked with people in Riverside, Moreno Valley, Beaumont, Banning, and Corona that are in this situation. It's something that we are going to see a lot of because a lot of people have short term fixed loans.
Then there are people today who have loans that are 5 year fixed loans. The fixed term isn't going to expire for say another 2.5 years. If they don't refinance now, they may be heading towards an inevitable foreclosure in 2.5 years and not even know it. Folks the way things are now, we don't know what financing will be available in 2.5 years. We don't know what home values in your neighborhood are going to be. If you are in a new area and purchased at the height of the market it's a very real possibility that you will owe more than your house is worth making a refi an impossibility. With payments adjusting higher, you might not be able to afford that house.
It's important to evaluate your situation and my advice to you is to refi into a normal 30 year fixed loan now. Get the security of a traditional fixed loan now because there is simply too much uncertainty in the market place today to think that just because you have 2 more years of a fixed term that you'll be able to refinance into a new fixed loan then, because a lot of the creative financing products that you may have used to qualify might not return for awhile. And if that happens you'll be stuck holding onto a rising mortgage payment that just might rise too high for you and your family to keep holding on to. FIX YOUR LOAN NOW.
Heading Towards Foreclosure and Don’t Know it yet?
August 27, 2007
There are a lot of things happening in the mortgage business everyday, from guideline and product changes, to banks going flat out of business. There are people who are purchasing homes and have been pre qualified with a bank that might be out of business when they finally find the home they choose to purchase (happened to my clients but don’t worry I lined them up with new financing quickly and I closed the transaction just a few days later).
The title of this post might be an eye cather. THat’s what it was meant to do. The people who really have the possibility to get in trouble is not necessarily the people I mentioned above, but it’s the people who already own homes and have loans that aren’t your standard vanilla 30 year fixed. You see a lot of people out there have loans that are fixed for just 2 short years, maybe 3 that are going to have to refinance into a new fixed loan when their short fixed term expires. Once the short fixed term expires, that payment will adjust and let me tell you, the payment will not adjust downward, it will most surely increase at which point it will become more and more difficult to hold on to that home. The problem lies in the fact that since loan guidelines have been so drastically tightened, there is a chance that you may not qualify to refinance into a fixed loan which would effectively make you STUCK with an adjusting payment until easier financing comes along. I’ve talked with people in Riverside, Moreno Valley, Beaumont, Banning, and Corona that are in this situation. It’s something that we are going to see a lot of because a lot of people have short term fixed loans.
Then there are people today who have loans that are 5 year fixed loans. The fixed term isn’t going to expire for say another 2.5 years. If they don’t refinance now, they may be heading towards an inevitable foreclosure in 2.5 years and not even know it. Folks the way things are now, we don’t know what financing will be available in 2.5 years. We don’t know what home values in your neighborhood are going to be. If you are in a new area and purchased at the height of the market it’s a very real possibility that you will owe more than your house is worth making a refi an impossibility. With payments adjusting higher, you might not be able to afford that house.
It’s important to evaluate your situation and my advice to you is to refi into a normal 30 year fixed loan now. Get the security of a traditional fixed loan now because there is simply too much uncertainty in the market place today to think that just because you have 2 more years of a fixed term that you’ll be able to refinance into a new fixed loan then, because a lot of the creative financing products that you may have used to qualify might not return for awhile. And if that happens you’ll be stuck holding onto a rising mortgage payment that just might rise too high for you and your family to keep holding on to. FIX YOUR LOAN NOW.
More: continued here
And The Hits Just Keep on Comin
August 7, 2007
Aegis Wholesale is closing yesterday August 7th, 2007. I personally consider them an Alt A lender but they have A paper stuff as well. This is another closing that has basically been very quick with little notice to those of us in the business. Thankfully I do not have any open transactions with Aegis at this time. I did have an open transaction with ABConduit, the wholesale division of American Home Mortgage last week when they were closing which of course happened with little notice and left those with open loans scrambling looking for another bank to close the deal.
What's difficult about this is that these Alt A lenders have become very important in the last 4 years. A lot of people purchase homes using stated income or no ratio product and with these banks closing, other banks are adjusting their products BIG TIME. I'm not saying they shouldn't be doing that, I'm just saying that the adjustments will make it so that many will not be able to refi out of their short term fixed loans into new fixed loans, they'll just have to stay on an adjustable note. It's really going to be a mess because of the current lack of liquidity out there until some liquidity returns when things settle down.
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