Conforming Limit Increases: First Look at Impacted Markets

Here's a first look at the likely markets that will be impacted by the increase in the Conforming and FHA limits.  Though they've been calculated by people paid to know such things, these figures involve some awfully screwy math, so your mileage may vary (click to biggify):

02/08/08 at 10:07 AM Permalink | Comments (0) | TrackBack (0)
Filed Under: Conforming Limit Increase, Mortgage Economics

Stimulus Package Passes, Conforming Limits Raised in High Cost Areas

The stimulus package temporarily raises the maximum size of mortgages that government-sponsored mortgage companies Fannie Mae and Freddie Mac can purchase and market as securities from $417,000 to as high as $729,750 in expensive parts of the country such as New York and California.

Stimulus Plan Helps Some Homeowners [AP]

02/08/08 at 05:50 AM Permalink | Comments (3) | TrackBack (0)
Filed Under: Conforming Limit Increase, Mortgage Economics

OFHEO Director James Lockhart Comes Down Hard Against Raising Conforming Limits

OFHEO (Lockhart testimony) Via Calculated Risk

Jumbo loans would present new risks to the already challenged GSEs. The prepayment and credit risks are different than those of conforming loans. The provision also pushes the GSEs to increase their geographic concentration in some of the riskiest real estate markets. Roughly half of all jumbos are in California. Underwriting them successfully will require new models and systems to ensure safe and sound implementation. Capital also would present challenges even if all newly conforming mortgages are securitized. A $600,000 loan requires as much capital as three $200,000 loans. . .

With the stimulus bill stalled and high profile opposition like the above, a conforming limit increase has not been as easy as many had expected, though we'd be floored if it didn't pass in some form soon.  Lots if political will behind it, whether or not it is a) a good idea, and b) going to help the housing market woes.

Other notable data points from Mr. Lockhart's testimony worth quoting:

• The GSEs have become the dominant funding mechanism for the entire mortgage system in these troubling times...concentrating mortgage risks on themselves..."
• Public disclosures indicate that Freddie Mac will report annual losses for the first time in its history and Fannie Mae for the first time in 22 years.
• Enterprise [Fannie/Freddie] credit losses...are approaching double normal levels and climbing.
• the combined [share of new originations] of the housing GSEs may be 90 percent. . . .
• They also have very large counterparty risks including seller/servicers, mortgage insurers, bond insurers and derivative issuers.

Suffice to say that if Lockhart has his way, we wouldn't see any increase in conforming limits without GSE reforms, and given the above, we are likely to see still more credit tightening from the Agencies.

02/07/08 at 01:32 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Conforming Limit Increase, Mortgage Economics

Conforming Limit Increase: Political Wrangling Ensues, Won't Impact Limits in Minneapolis/St. Paul

A quick update on the political gymnastics on display over the proposed increase to conforming loan limits, from our source:

"Bottom-line, to date the Senate Finance Committee bill...DOES NOT CONTAIN the raising of loan limits for FHA, Fannie, and Freddie.  The House bill DOES CONTAIN the raising of the loan limits but does not contain the tax treatment provisions.  We must now hope that if the House bill is the one passed, that an amendment will be added to include the favorable tax treatment provisions so that both the mortgage and home building industries could be participants in the stimulus.  If the Senate Finance Committee bill gets passed, then hopefully it will contain an amendment to raise the loan limits."

In other words, the exact nature and scope of the housing related elements in the stimulus bill is still very much up in the air and far from done.

Also, for the home (MN) crowd: If congress DOES raise the conforming limit to $625/$725/$730/Whatever it will likely have no impact here.  That's because an increased conforming limit is not an across the board increase. 

It works like this:  The limit can be increased to 125% of the Median Sales price of the Twin Cities MSA with a FLOOR of $417,000.  That "floor" part is important, because the Median Sales Price in our MSA is roughly $232,000 (125% of that number is $290k.)

In other words, Twin Cities conforming limits won't change, and will stay at $417k.

Related: News on Conforming Limit Increase: $625,000? [BTM]

02/02/08 at 07:41 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Conforming Limit Increase, Financing Options, Interest Rates, Mortgage Economics

News On Conforming Limit Increase: $625,000?

We'll post this without comment other than to say, anything can happen in Washington (so don't place any big bets on this info), and this is from a very reliable source:

"Sources in the House, the Senate, and the White House are all indicating today that a tentative consensus has been reached that the economic stimulus bill that Congress will send to the President will include much of the FHA Reform Legislation including raising the FHA loan limit max to match the FHA conforming limit AND a one year raise of the conforming limit to $625,000 with the possibility of an additional one year extension at expiration. All sources also indicate Congress will deliver the bill to the President before their break in mid-February and that it should be signed by the end of February. Obviously this is not "done" but all of the sources I am using are very close to the action. This would mean that we could see at least the loan limit portions of the legislation we are hoping for within the next 6 weeks."

[Update: Lively discussion on this topic over at Calculated Risk, courtesy of Tanta, who was kind enough to link up this post ]

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01/23/08 at 05:15 PM Permalink | Comments (1) | TrackBack (0)
Filed Under: Breaking News, Conforming Limit Increase, Financing Options, Mortgage Economics