Fannie and Freddie to underwrite up to $725K

16 years ago

"The package also raises the conforming loan limits for Fannie Mae and Freddie Mac, beyond the current $417,000, which would allow the government-sponsored companies to buy bigger loans in areas with high housing costs. Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said the new limit would be 125% of a metropolitan area's median housing price, up to a cap of about $725,000."

Wow, talk about trying to perpetuate a bubble... I'm not sure, but I suspect this is a bad idea, rooted in the best of intentions...

Here is a link that might be useful: wall street journal article on stimulus package

Sort by:Oldest

Comments (7)

logic
16 years ago
The article has the Fannie Freddie cap at $625K...

Be that as it may, IMO that is not a bad thing in itself...IF the loans are given ONLY to people who can PROVE that they can readily afford to pay them back. However, I would like to see those caveats attached very firmly as inviolable conditions to that underwriting.

If so...this will be helpful in our area, where the average home price is at about 600 or so...with most much higher....and where the incomes are quite high. This could definitely help move some of the homes currently for sale..however, interestingly enough, the number of homes on the market at any given time in our neck of the woods has remained fairly steady over the last few years...

As far as the restÂa mere drop in the ocean.
galore2112
16 years ago
Well, that certainly doesn't help the buyer as much as it helps the seller. Because that'll just keep house prices sky-high.
Related Discussions
Real Estate Appraisals In The New Economy
Q
Comments (26)
guvnah- Great link! It shows how "broke" the system really is in Texas. Some buyers and sellers want to hide the sales prices due to property tax issues which have become a huge burden in Texas. They should stand up to the local and state governments for more reasonable spending and taxation. The problem is I don't see that happening anytime soon with local school districts building 80 million dollar sports complexes with jumbotrons, etc. They are sellng massive bonds to build mega high schools, and aquiring a huge debt load. Realtors have long controlled prices, almost to the point of price fixing, with resticted and massaged sales numbers in MLS. If a house sold for $200,000, the public area of MLS will give a range of sold range of the house as 200,000 to 275,000. What good is that? Another pet peave is Days on Market(DOM)reporting on MLS. If a property was on the market for 180 days and the current listing contract expires, the current agent or a new agent can re-list it with a new contract and possibly a lower sales price, there by aquiring a new MLS number and start the DOM clock back to 1. I have seen properties that have been on the market for over a year have a DOM as recently listed and under 30 days! Sure you can go to a realtor to get that info, but why should you? Appraisals and market pricing, in Texas, have always been controlled by realtors. They control what is reported in and out of MLS. They will tell you that it is the market, ie, buyers and sellers that set the price, but in its the realtors that that actually "set" market price by telling buyers and sellers what price they should offer and sell at. I believe that if Texas had full disclosure that all values, after a settling period, would reflect the "true market". Home owners and sellers would have to stop voting for massive bond and debt loads and hold the local and state officials accoutable for responsible spending. Realtors/MLS sould be required to run an "open" book for listings and sales. This is the only way to provide the information required for accurate appraisals. Then its up to the appraisers to use their training and experience to provide their opinion.
...See More
Freddie Mac/Fannie Mae
Q
Comments (14)
Hi Frog-Hopper, Capitalizing every letter in every other word doesn't make it so. Really??? That's the BEST response you could come up with in light of the statement's content itself? Wow... I'm floored. ================================== Hi Lukkiirish, If possible, I would love to hear what your thoughts are about globalization, if a fix should be put in place for those states and if so what kind. The midwest is experiencing the pain of natural economic cycles and flows. It is in reality a much greater scale than the abandoned gold rush ghost towns of the 1800's... but the principals (and inevitable results) are the same. The midwest grew, at one time, to be dominant in manufacturing due to technology. Namely; shipping routes through the great lakes that allowed industry to stretch out west to less populated (and thus cheaper real estate) regions. In essence the Eastern seaboard had ITS nice paying jobs "pilfered" by continental "globalization" of cheaper overhead and labor in the midwest. Technologies have now developed to the point where the midwest (unfortunately) is experiencing a bit of "come-uppance" on it's treatment of the east coast 200 years back. The natural demands of the economy is best fulfilled elsewhere at cheaper costs and higher qualities. Imagine if you could go back in time to JUST as the gold rush was beginning to ebb, and (knowing what you know today in 2008) you could give advice to the folks in that town. Would you advise them to raise taxes and spend money to attract new kinds of mining businesses (because they were obviously the mining industry leaders already for ages)? Would you advise them to try to dig out big lakes to grow fish for new industries? Would you advise them to cut channels and raise aquaducts to bring in irrigation water for new farming lands that they had never had in those areas? OR... would you in your future wisdom, advise them that "the gig is up... time to move your families to where industry and the economy are actually going towards"? I think the most supportive thing we can do for folks is help them grow and learn to succeed. For MANY in the midwest (who are not yet at retirement age,) that means pulling up roots and making big changes. EVERYONE has the right to make their own choices, including the choice of remaining back in the "ghost towns" from the gold rush (or steel rush, or automobile rush, etc. etc.) But its counterproductive to ALL of society to try to burn our limited resources reversing the natural ebb & flow of the world economics. Cheers, Dave Donhoff Leverage Planner
...See More
Wells Fargo Removes Themselves From Jumbo Market
Q
Comments (20)
>>WF is a huge percentage of the jumbo market, around 20% last I read. I would think getting out of that market would be damaging for them (but I guess not if they are doing it). Wouldn't they lose a good percentage of those high net worth banking accounts, investment accounts, etc? The answer is no. They are still charging 18%+ on credit cards, enormous fees for "extras" on checking (its competitor WaMu, for instance, admits it can offer "free" checking because they make so much $$$ off overdraft charges), spreads on corporate loans and investment accounts, etc. In comparison, being a mortgage lender is just part of their 'soup to nuts' market emphasis as a large financial institution. It isn't their sole bread-and-butter. Sheer inertia prevents most people from moving their checking and investment accounts around, and financial institutions know they can count on it. Do I bank with WF? Yup. They have the biggest ATM network in my area, and I live and die on those - I HATE going into a bank. I also have a large number of auto payments set up, which would be a nightmare to try to unravel and move to another bank. Do I have my mortgage with them? Nope, better rates were available from WaMu. Do I have my investment portfolio with them? Are you kidding? Give our family's portfolio to a bank's second-rate investment division? No way! For example, BofA took over US Capital, where some of my (much richer) friends had their portfolios managed. They are EXTREMELY unhappy more than a year later, feel they have really lost the small-firm personal touch, and most of them are starting to look around for other advisors. The notion of keeping all your financial affairs with one bank is passe these days to anyone with financial sophistication. It's like remodeling a kitchen - go with the vendor in each segment that does it better than the competition and has the features you want. The jumbo loan market is actually smaller than we think. It covers a fairly narrow range of homes from the $500K to around $2M or so. RE agents say that homes in the $3M+ range tend to be cash sales; such buyers don't need mortgages.
...See More
Mortgage Banker Question re: Condo Purchase/Sale
Q
Comments (11)
Thanks! I'm not in the mortgage business, but quite honestly I don't think that fixed vs adjustable rate is related at all to that. Why would it? In fact, you'd think that as a lender, a fixed rate is way safer. In fact, the rules for ARM have been substantially tightened to make sure that people don't get lured into loans they can't repay when the rates rise. See an article on ARM vs fixed rate below. I think more important is how the fact that the apartment complex is less than 50% owner-occupied affects its value now and in the future: Who are the tenants? Is the complex in could shape? How are the HOA finances? What's the delinquency rate, i.e. people not paying the HOA fee or empty units? Reserves for maintenance and future replacements? Here is a link that might be useful: what's better?
...See More
mfbenson
Original Author
16 years ago
"The article has the Fannie Freddie cap at $625K..."

They edited it. My quote was a cut and paste from when the story first went up on WSJ.com - oh well, that's what I get for following a single news source without checking others first.

"Because that'll just keep house prices sky-high."

Exactly - and since they need to keep city and county property tax revenues high, this kind of thing will be welcomed with wide arms by about everyone.

Also, it said that the FHA was going to write loans up to $725K which I guess is going to be corrected to $625K. Still, $625K sounds mighty high for a loan that supposed to be going to "working poor" families.

I like the idea of it being capped to 125% of the local median. I wonder how often they will measure the median and update the local cap. And if the cap will go down with the median.
logic
16 years ago
I think it is all relative....as they are apparently planning to raise to the highest point of the cap in areas that are inherently pricey...boom or not....such as NJ/CT/NY/PA...and of course CA...which probably takes the cake in high home prices.

There are some areas where homes are simply extremely expensive to build...due to land, labor and material costs regulation, permitting, testing etc., etc.......those are fixed costs that have nothing to do with seller overpricing to compenaste for overborrowing.

Cost to build here is at $200.00 per SF, not including cost of land, for a nice, mid range home...without high end bells and whistles.

It is what it is.
logic
16 years ago
Hmmm...the MSNBC article has it at $725K...
Will the real cap please stand up...

Here is a link that might be useful: Bush hails tax-rebate deal as robust
rivkadr
16 years ago
This may be a dumb question...but will this affect refinance loans as well?
brickeyee
16 years ago
"This may be a dumb question...but will this affect refinance loans as well?"

They are lifting the 'conforming' limit.
You will be able to get a conforming loan (and the slightly lower rate they carry) instead of being forced into a 'jumbo'.

Only 'conforming' loans may be sold into the Fed companies.
Jumbos must either be held by the issuer or packaged into commercial bonds.

Fannie and Freddie to underwrite up to $725K

Comments (7)

logic

galore2112

Related Discussions

mfbenson
Original Author

logic

logic

rivkadr

brickeyee

COMPANY

BUSINESS SERVICES

GET HELP

CONNECT WITH US

Fannie and Freddie to underwrite up to $725K

Comments (7)

logic

galore2112

Related Discussions

mfbensonOriginal Author

logic

logic

rivkadr

brickeyee

COMPANY

BUSINESS SERVICES

GET HELP

CONNECT WITH US

mfbenson
Original Author