A Day In The Life of A REALTOR

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The Office of Federal Housing Enterprise Oversight (OFHEO) today announced it has temporarily increased limits on conforming loans offered by government-sponsored enterprises, Fannie Mae and Freddie Mac, from $417,000 to as high as $729,750 in fourteen counties in California for loans originated between July 1, 2007 and Dec. 31, 2008. Fannie and Freddie are reported to be working out new underwriting standards and expect to begin offering the new loans soon.

Also, on Wednesday, the government raised the conforming loan limit for mortgages guaranteed by the Federal Housing Administration, and has begun offering the maximum limit of $729,750 for 14 California counties, up from $362,790, for loans originated between now and Dec. 31, 2008.

The Fed’s economic stimulus package approved earlier this year called for temporary increases on conforming and FHA loan limits to allow troubled borrowers to refinance out of sub-prime loans and make it easier for many new buyers to qualify for mortgages in high-cost areas, particularly in California where home prices remain among the highest in the nation.

To view a list of the new FHA Mortgage Limits by county, go to:

FHA Loan Limits by County

For a list of the proposed loan limit changes for Fannie Mae and Freddie Mac, go to:

Fannie Mae and Freddie Mac Proposed Loan Limit Changes

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Fed’s interest-rate cuts will benefit ARM, HELOC borrowers
Effect on long-term rates remains to be seenTuesday, January 22, 2008

By Matt Carter
Inman News

The unscheduled and dramatic cut in short-term interest rates announced today by the Federal Reserve will provide immediate relief for borrowers with home-equity loans or facing interest-rate resets, mortgage market experts say.

But long-term rates — which were at 2 1/2-year lows before today’s 75-basis-point reduction in the discount rate and the target for the federal funds overnight rate — could move in the other direction if bond market investors get nervous about inflation.

For now, the Fed seems to have decided that the threat of a recession far outweighs the risk of inflation, making in a single day cuts in short-term rates some observers had expected would be stretched out over months.

“Just a few weeks ago, the consensus was that the Fed would cut no more than 75 basis points, and 3.25 percent would be trough,” said Freddie Mac’s chief economist Frank Nothaft. “We’re there already. So are we at the low point? It’s really hard to say.”

Nothaft said the Federal Reserve’s Open Market Committee could cut rates again when it holds its scheduled meeting Jan. 29-30. Or its members may want to wait and see how to today’s dramatic move affects economic indicators.

The rate cuts are “certainly good news for people who have mortgages, or are shopping for a mortgage,” Nothaft said. For those with adjustable-rate mortgages (ARMs) indexed to the prime rate or home-equity lines of credit (HELOC) loans, “this shows up right away in terms of lower interest rates,” as banks follow suit and lower the prime rate to 6.5 percent. For ARM borrowers facing interest-rate resets, Nothaft said, that translates into a smaller increase in payments, and “maybe even a decline.”

According to Freddie Mac’s most recent weekly survey of mortgage rates (see Inman News story), the 5.69 percent rate on a 30-year fixed-rate loan was the best in 2 1/2 years. While it remains to be seen what effect the cut in short-term rates will have in the long run, rates on 10-year Treasurys fell today as stocks bounced back from earlier losses, Nothaft said.

Although rates on 10-year Treasurys are not linked directly to mortgage rates, they tend to move in the same direction, as they play a similar role in investor’s portfolios.

“It helps more than it hurts,” said Doug Duncan, the chief economist for the Mortgage Bankers Association. “It’s probably not going to bring long rates down much further, but it certainly brings short rates down, and has some positives for the whole economy and housing.”

Duncan said what happens with long-term rates depends largely on whether market participants think the Fed has gone far enough with short-term cuts.

If today’s cuts are seen as adequate, “that increases expectations of future economic growth, and may establish a sort of bottom where the 10-year Treasury yield is going to go,” Duncan said. “I don’t expect the 10-year Treasury yield to go much (lower), unless there were a whole bunch more difficult financial announcements made in the next couple of months.”

What the rate cuts probably won’t do is restore investor confidence in the secondary market for mortgage loans not guaranteed by Freddie Mac and Fannie Mae. That means borrowers seeking subprime and so-called jumbo loans will continue to pay much higher rates than offered during the housing boom. 

Although the secondary market for loans within the $417,000 conforming loan limit “is working just fine,” Nothaft said, rates on jumbo loans are about a full percentage point higher than those for conforming loans.

The National Association of Realtors and some Democrats in Congress are pushing for a 50 percent increase in the conforming loan limit to allow Fannie and Freddie to buy or guarantee loans that are now considered “jumbo.”

The Bush administration wants stricter oversight of Fannie and Freddie in place before it will go along with an increase in the conforming loan limit, saying the bigger loans may involve more risk, and reduce the number of smaller loans the government-sponsored enterprises can back (see story).

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With all of the frenzy over whether or not Countrywide is going under, here is a GREAT article that makes sense.

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Our in-house lender, Tom Obrien, emailed this out today,
“Because of the current market with a lot of lenders going out of business, rates on Non Conforming loans ( loans over $417,000), and Alt A (stated, on full doc loans), their rates are going up quite a lot to cover their losses in the market and because of their high risk.  If you’ve got buyers that don’t have locks on their loans, please make sure they do now.  
Rates have  moved up .625% in rate this week on 30 year fixed loans, and ARM’s have moved up .25% – .50% in rate.  The conforming loans (loan amounts up to $417,000 and under) have actually gotten better this week.  Please don’t hesitate to contact me with any questions.”

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