New Increased Conforming Loan Rates no help as of yet
So the new conforming loan rates have been signed into law, and many of us have been waiting to see how those new guidelines will actualize themselves in the coming weeks.
Unfortunately it's not shaping up to be much of a boost to the jumbo loan affordability, at least for the moment.
As reported by Matt Carter from Inman News - The Securities Industry and Financial Markets Association announced that the new conforming loan increase of $729,750 will not be put into the same pool of secondary market where most conforming loans are traded, presumably to avoid contamination and an increase in interest rates to existing conforming loans.
The primary concern for investors of the new 'jumbo light' loans is early pre-payment ironically, not default of the existing loans.
Meantime interest rates, while still at historic lows overall, have been inching up steadily since the Fed's began lowering rates the beginning of the year - presumably on fears of inflation, is the latest buzz explanation I'm being told.
Thanks for Stephen Barber at Pacific Guarantee for passing the Inman News article onto me - it's well worth the read for any mortgage interest watchers.
posted by Meredith Martin @ 10:49 AM
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15 Comments:
Isn't it too early for there to be any affects on the SF Market seeing as how the new limit doesn't go into effect until July 1, 2008 which is the first date one may apply for a loan under the new law?
Hey Eric,
I haven't, nor have any of my mortgage brokers heard about the July 1st date you mention. My understanding is that the law went into effect immediately and the delay is simply the banks are in the process of drafting new guidelines for the new limits which are supposed to take at least a month.
Where did you get the July 1st date?
I saw it at the 3 Oceans Real Estate blog and it is also what's quoted by the Chronicle columnist Carol Lloyd. However, I just went to the source and it is in fact in effect. It should have a retroactive date of July 1, 2007.
Yes, I did a little inquiry myself on that date and it it actually deals with loans retroactively originated by the banks and how far back they can go on the secondary market and sell them to fannie mae.
It deals with bank loans already on the books that may qualify under the new guidelines and doesn't have anything to do with the end consumer.
I'm being told most banks are trying to roll out their new 'super conforming loans' products mid March. With a little luck the interest rates will start cooperating.
The law only effects GSE not banks, this will provide a secondary market for JUMBO loans when and if the GSE's can generate the necessary rules ( what they will accept) and get the necessary funding to buy the additional loan loads. The bond market MUST be willing to buy the GSE bonds providing they are able to get insurance. Don't expect any GSE buys until late summer or early fall.
It will be a big shock for the Alt-A (Bay) Area when they try to apply for these non-jumbo loans and realize they have to document their income. And put money down. LOOK OUT BELOW!
Um, in order to qualify for a GSE-backed loan, you have to actually earn enough money to make the fully-amortizing payment on a 30-year mortgage. No teaser rates from the GSEs, no interest only. How will Bay Area houses be sold when only a tiny fraction of the residents here earn enough money to make the minimum payment on a median mortgage, even if the interests rates drop to like 3%?
I still love how people can spend so much time talking about the Bay Area, when we NEVER talk about anything other than San Francisco on this blog... Yes, the lending landscape has changed, but despite your wishful thinking (Brandon and Anonymous), we're not seeing that many people having trouble finding loans right now.
It's unfortunate that the conforming loan package likely won't offer any benefits to 95% of borrowers in San Francisco, but there's still plenty of money out there for downpayments, and plenty of money that banks are willing to lend to good borrowers.
If San Francisco was in such trouble (as some who have commented are implying), we'd be seeing lots more short sales and foreclosures. And contrary to over-hyped media stories, we're just not in trouble in San Francisco.
Yes, there are irresponsible people in San Francisco who over-borrowed in the last few years, but there are still far more people ready and willing to bail them out by buying their properties at fair market value.
The conforming loans will require borrowers to provide full-documentation, but there are still plenty of loans out there for people like me (a Realtor, considered a contractor or self-employed) who do not qualify for a full-doc loan (or any of the new conforming loans), yet are very qualified to borrow money.
It's true that some properties are not selling, but it's not because of lack of potential buyers. It's because of over-zealous sellers or listing agents who are pricing the properties too high. Properly-priced properties are still selling within two weeks, and often with multiple offers. It's just a function of knowing the market, whether you're a buyer or a seller...
Meanwhile investors are selling FNM and heading for the hills. Calis are deadbeats.
Matt: Notice the RE sales velocity trend lately? The reason they upped the GSE limits was the hope that sales velocity would return to the market. With sales velocity numbers decline comes continued RE market deflation, higher inventory and a MUCH smaller RE industry.
There you go again, referring to things outside the scope of the original conversation. If the GSE's were only looking at San Francisco, we wouldn't have needed an economic stimulus package. Sure, it will bolster the housing market, and for that I'm pleased, but they didn't do it because San Francisco is in trouble...
The biggest thing that most of the negative commentors forget to realize is how much of a microcosm San Francisco is. We're not middle America, and there are still PLENTY of people with 20%+ downpayments that are ready and willing to buy right now.
That might not be the case 5 miles away, and might not even be the case in some limited parts of San Francisco (District 10, for example -- Outer Mission, Bayview, Crocker Amazon, etc, where the default rate is slightly higher than in other parts of the city), but for the traditionally strong neighborhoods, the story is still the same.
In looking at data from the MLS over the past few years, the annual, cyclical trends are still the same, except the NUMBER of sales might be off by a couple of percent. Not the 20%+ that other parts of California is seeing. And this still has not equated to lower housing prices. In fact, SF is still up around 6% over last year.
The only doom and gloom buyers in San Francisco are seeing is that there is no sign of falling prices...
Matt: S&P Case Shiller Housing Index shows the following for 2007 in SAN FRANCISCO:
"San Francisco, another once-frothy market, in December slipped into negative double-digit territory with an annual decline of 10.8 percent"
MLS does not show Home Appreciation rates or declines, San Francisco is part of the USA and is effected by the change in lending standards and economic dips.
Wells Fargo has named nearly every California county a “Severely Distressed Market” which requires LTV reductions of 5% for any conforming loan over 75% LTV and also eliminates financing over 75% LTV for any non-conforming loan. The Wells Fargo Mortgage Express product (which is Wells Fargo’s stated income/stated asset program) is also not permitted in “Severely Distressed Market” areas.
here is the new GSE standards for JUMBO:
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0805.pdf
Your not alone I had that July date confused with this summer also. I thought you wouldn't be ablt to apply till July 2008 and they are currently working on how to do this. Fannie/Fredy seem like they may not do the conforming/jumbo loans. I to need to do some more research.
While we all struggle to keep up with recent changes and implentation dates it can be confusing to all.
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