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Brain Twister--Increasing loan limits but prices are declining

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Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
This question was asked by the WSJ, "If median home
prices have fallen to $202,300 from $219,900 and prices
appear to be declining, why is Congress raising FHA
mortgage limits to $729,000 in high income areas?
 

Tim The Enchanter

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
If people can't afford to pay on the $500k or $600k they borrowed, a higher limit is not going to help them one bit.
It's useless. :leeann2:
 

c w d

Senior Member
Joined
Oct 2, 2006
Professional Status
General Public
State
Florida
If people can't afford to pay on the $500k or $600k they borrowed, a higher limit is not going to help them one bit.
It's useless. :leeann2:

Something else is going on here. I'm not sure what it is. But popularity and purely higher limits to "help" are not it.
 

Ghost Rider

Senior Member
Joined
Apr 27, 2003
Professional Status
Banking/Mortgage Industry
State
Connecticut
Simple - Window Dressing.......Lots of consumers are in loans that Fannie wouldn't touch - Since Fannie is a Pseudo Mortgage Arm of the Government, it's nice to be able to say we are offering loans that *may* help rescue some borrowers from loans they should not be in......

For what it's worth, posting a median home price for the nation is worthless - In many markets, there is no such thing as a $200,000 house - doesn't exist, so why discuss median home pricing in such a way - Its the same for the other NAR statistics which throw the nations financial markets into turmoil every time that pending home sales, or new home starts, or any other nationwide statistic is posted.....Meaningless since Real Estate is so market specific.
 

Bama Bayou

Senior Member
Joined
Oct 19, 2006
Professional Status
Certified General Appraiser
State
Alabama
Simple - Window Dressing.......Lots of consumers are in loans that Fannie wouldn't touch - Since Fannie is a Pseudo Mortgage Arm of the Government, it's nice to be able to say we are offering loans that *may* help rescue some borrowers from loans they should not be in......

For what it's worth, posting a median home price for the nation is worthless - In many markets, there is no such thing as a $200,000 house - doesn't exist, so why discuss median home pricing in such a way - Its the same for the other NAR statistics which throw the nations financial markets into turmoil every time that pending home sales, or new home starts, or any other nationwide statistic is posted.....Meaningless since Real Estate is so market specific.

Thank you Ghost, I believe you are correct. All these statistics about median price are, quite frankly, complete BS. It tells us nothing. The Case Schiller Idex is supposedly one of the best indicators, yet it only covers 20 markets and they are all resales of the same properties. It is not real. It may due a good job of tracking flippers but has little basis is reality. Most people don't trade houses as if they are stocks. To them it is their home, not a commodity.
 

moh malekpour

Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
This question was asked by the WSJ, "If median home
prices have fallen to $202,300 from $219,900 and prices
appear to be declining, why is Congress raising FHA
mortgage limits to $729,000 in high income areas?

One doesn't have anything to do with the other. The national median sales price doesn't have anything to do with the limit on FHA loan. They increased it because there is practically no more sub-prime or Alt-A lender out there to lend. I guess 60% of all loans in 2006 and 2007 were sub prime and Alt-A. Investors simply don't buy sub-prime or alt-loans anymore. where the borrower should go? when they close one door, they got to open another door. They cannot close all doors to borrowers.
Can we say FHA is replacing the sub-prime and ALT-A? The different is that you and me will have to pay for FHA loan if the borrower didn't want to pay and for that reason, investors are willing to buy it but they are not interested to buy sub prime or alt-a because they have to feoreclose on the loan and lose money.
 
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Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
I'm glad none of you are charged with teaching economics to college students. We've gone over this before and it is just ONE thing in the Feds attempt to solve the foreclosure dilemna.
 

moh malekpour

Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
I'm glad none of you are charged with teaching economics to college students. We've gone over this before and it is just ONE thing in the Feds attempt to solve the foreclosure dilemna.
Mike,
Suppose you bought a home 2 years ago that you should have not. Now the price of your home is 30% below of what it was when you bought it. You cannot refinance it because you got no equity and you are 30% in red and it doesn't make sense to sell it because the sale price is going to be 30% less than what you owe. You want to keep the home but you cannot pay the monthly mortgage and you are delayed on it for four months. You got a notice that your home is going to be foreclosed very soon. How the increase of FHA loan is going to save your home?
 
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