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Fannie/Freddie Limits Raised, new refi boom?

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Tim Schneider

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Joined
Feb 8, 2007
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Certified Residential Appraiser
State
Wisconsin
I read that as a part of the new economic stimulus package, fannie/freddie limits are going up to $729,750. I predict this will cause many people to refi their loans which were previously jumbo to more traditional loans. What say you?
 

Mike Boyd

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Jan 18, 2002
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Retired Appraiser
State
California
I agree.....but even more so when and if the FHA limits are raised to 87% of the Fannie max.

I inspected a house this morning. The agent says she has never been busier but due to the lower interest rates, not the proposed increase in conforming loan amount.
 

Bama Bayou

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Oct 19, 2006
Professional Status
Certified General Appraiser
State
Alabama
I think you are both right, this should help the refis and to a lesser extent sales. Many folks with jumbos will be licking their chops over a 5.5% conforming loan, and the FHA bump up loan amount is substantial.
 

Riick

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Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
I can tell you that in the last 10 days my business has gone from Dead STOP to medium speed. Virtually all the Refis & Sales are FHA.
(( I'm waiting for the inevitable request "re-assign" a Fannie 1004 appraisal to HUD/FHA. ))
========================================= EDIT

As far as refinances go, the issue is even with raising those loan limits, people are tapped out on their equity, so it may not make a difference from the point of getting out of their existing situations,'' said Kevin Henneman, branch manager of Prime Rate Funding.

Here's Bloombergs Take:

Jumbo' Loan Increase May Not Stem Housing Decline (Update1)

By David M. Levitt
Feb. 8 (Bloomberg) -- A congressional plan to let Fannie Mae and Freddie Mac insure larger mortgages may not be enough to reverse the U.S. housing market slide, said Nishu Sood, a homebuilding analyst with Deutsche Bank Securities.

Congress yesterday passed a $168 billion economic stimulus package to head off a recession. The bill will allow Fannie and Freddie to raise the limit on purchasing ``jumbo'' loans to $729,750 from $417,000. Mortgages will be eligible if they were granted between July 2007 and Dec. 31, 2008.

``The headlines are more exciting than the potential for real impact,'' Sood wrote in a research note yesterday. ``Not only do the proposals have limited reach and a short timeframe, but also qualification standards could limit the number of buyers that could benefit.''
Mortgage lending will fall to an eight-year low this year as home prices continue to drop, the Mortgage Bankers Association projected last month. Record foreclosures, lax lending standards and speculation have contributed to the worst drop in home sales on record.

Supporters of higher loan limits said the plan will help struggling homeowners finance larger mortgages at lower interest rates, especially in expensive metropolitan areas such as New York, Washington and Southern California, where median home prices now exceed the $417,000 limit.

Markets Get Help
The bill would also allow the Federal Housing Administration to insure loans up to the same $729,750 limit. President George W. Bush said today he will sign the bill next week.

The measure may only help buyers in the most expensive markets. In only eight markets, including the metro areas of New York, Boston, Los Angeles-Orange County, San Jose-Santa Clara in California, and Washington, are prices high enough for the rise in loan limits to have an impact, according to Deutsche Bank.

The San Jose-Santa Clara area, home of Silicon Valley, had the U.S.'s highest median existing home price, $852,500, in the third quarter, according to the National Association of Realtors.

No Help for Las Vegas
The study found only marginal impact in Miami, Sacramento, California, and the California's Inland Empire region. It found no impact in Phoenix, Las Vegas, Chicago and most major Southern markets, including Houston and Dallas.

Less than 10 percent of the markets of the biggest publicly traded homebuilding companies, such as Toll Brothers Inc., NVR Inc. and Hovnanian Enterprises Inc., will benefit from increase, Deutsche Bank found.

More than 80 percent of the property owners who sought to refinance through Prime Rate Funding in the last three months were unable to do so because their home's value had dropped, said David Pearl, the mortgage director of Prime Rate Funding Group Inc., a Timonium, Maryland-based brokerage that serves homeowners in Maryland, Pennsylvania, Virginia and Delaware.

``As far as refinances go, the issue is even with raising those loan limits, people are tapped out on their equity, so it may not make a difference from the point of getting out of their existing situations,'' said Kevin Henneman, branch manager of Prime Rate Funding.
 
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timd354

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Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
I read the legislation that passed and this is how it will work, the new fannie/freddie loan amount will be 125% of the area's median home price with a maximum cap of $729,750. Thus, most areas will see a far less maximum fannie/freddie loan amount. The max FHA loan amount will be the same as the Fannie/Freddie amount in that area. Under the legislatiom, the FHA will have up to 30 days after the bill is signed to compute the mdeian home price for each MSA or other applicable area. George Bush said that he will sign the bill early next week and it will take effect immediately, so hopefully, we will start seeing the new loan amounts within the next 30 days or so. The only downside to this new law, is it expires on 12/31/2008, so, if it is not extended, then the maximum loan amounts will revert to what they would have been without the new law.
 

WallyII

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Apr 28, 2007
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Gvmt Agency, FNMA, HUD, VA etc.
State
California
If the goal is to stop the declining market, the new Fannie/Freddie loan amounts will do little good in my area. It'll be like throwing a dinner chair off the Titanic. You still have to qualify for these loans. No more "liar" loans. With the median income in my county at 79K/yr, who cares if the limit goes up to 700k?
 

So Cal RealEstate

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Joined
Jun 3, 2003
Professional Status
Certified Residential Appraiser
State
California
If the goal is to stop the declining market, the new Fannie/Freddie loan amounts will do little good in my area. It'll be like throwing a dinner chair off the Titanic. You still have to qualify for these loans. No more "liar" loans. With the median income in my county at 79K/yr, who cares if the limit goes up to 700k?

It will affect a lot of people that have equity that can move out of jumbo loans to conv. loans it has a huge impact....A lot of higher end property owners have not used the house as an atm refi'n every 6 months to make ends meet!
 

Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
....... The only downside to this new law, is it expires on 12/31/2008, so, if it is not extended, then the maximum loan amounts will revert to what they would have been without the new law.

About 2-3 years ago the Feds recinded a "temporary tax" that had been in-place since before 1900!
You can be sure that this will stay in place well past 1/1/09.
JMHO
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
"Mortgages will be eligible if they were granted between July 2007 and Dec. 31, 2008".

Will have little impact at all. Extend the time frame to 2000 and "capture the attention" of the more Savy "jumbo" buyers. As always, too little too late.
 
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