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Posted by Deborah Blue & Marcus Robinson on May 9th, 2020 12:21 AM

FHFA raises conforming loan limits to
$484,350

The Federal Housing Finance Agency gives 2019 homebuyers a break with a 6.9% increase in the max loan amount Fannie Mae and Freddie Mac can purchase




Homebuyers will be able to afford a little more house at a slightly cheaper rate next year thanks to a 6.9 percent boost in the so-called “conforming loan limit.”

The increase in the ceiling — the maximum loan amount secondary mortgage market giants Fannie Mae and Freddie Mac can purchase from local lenders — to $484,350 was announced on Tuesday by the Federal Housing Finance Agency, the regulator that oversees the two companies.

The change takes effect on Jan. 1, 2019. The previous limit has been $453,100.

In certain high-cost areas like California, New York City and Washington, D.C., the limit will be 150 percent of the baseline ceiling, or $726,525.

And based on special statutory provisions, the baseline ceiling in Alaska, Hawaii, Guam and the U.S. Virgin Islands will be $726,525 for single-family houses and somewhat higher for two-, three- and four-unit properties.

As a result of generally rising home values, the FHFA said, the maximum conforming loan limits will be higher in 2019 in all but 47 of the country’s 3,300-odd counties or county equivalents.

The limit is key because mortgages that are purchased from primary lenders by Fannie Mae and Freddie Mac and rolled into securities for sale to investors worldwide are usually as much as quarter-percent cheaper than that charged by lenders who hold their loans for their own portfolios.

Investors are willing to take slightly less profits because the two government-sponsored enterprises back the mortgages by the full faith and credit of the U.S. government.

Fannie and Freddie, sometimes known as “the agencies” in the mortgage sector, have been in conservatorship for the past decade. They were taken over by Uncle Sam in 2008 at the height of the housing crisis.

And although there have been several bills thrown into the hopper over the years to rework the secondary market system, including one or two that would turn the two companies into totally private companies, Congress has yet to act, waiting, observers say, for the executive branch to throw its weight into legislation of some kind.

One reason neither the Obama or Trump White Houses has seen fit to act to date is that the two government-sponsored enterprises are still making gobs of money, money that, under the rules of their conservatorships, is swept into the general Treasury.

This will be the third consecutive year in which the limit has increased. From 2006 to 2016, the ceiling remained stagnant at $417,000 as home prices tumbled and then gradually made their way back to pre-recession levels.

But in 2016, the limit rose to $424,100, and last year, it rose again to $453,100.

The limit is determined by the Housing and Economic Recovery Act of 2008, which mandates that the base ceiling cannot rise until house prices rise to pre-decline levels. In the third quarter, the FHFA’s House Price Index, showed the prices rose an average of 6.9 percent quarter-over-quarter from last year.

Click here for a map showing the maximum conforming loan limits across the country.

Click here for the county-by-county list of limits for 2019.



Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.

Posted by Deborah Blue & Marcus Robinson on November 30th, 2018 2:02 PM
Posted by Deborah Blue & Marcus Robinson on November 28th, 2017 10:07 PM

 

‘Are FHA loans too good to be true?’

QUESTION: I am 23, make a decent amount of money and would like to buy my first house. I have a 4-year-old son. My now-ex trashed my credit while I was a stay-at-home mom for eight months. I’ve been wrangling my finances, and my credit score is in the low 600s. I have $10,000 in savings.

I don’t want to deal with landlords anymore, and I want a place of my own. My friends have told me that an FHA loan is my only option. But reading about the FHA loan program, it seems almost too good to be true. Are there any immediate concerns I should have about an FHA loan? Should I wait to buy a house until my credit has been mended?

ANSWER: People say when something sounds too good to be true, it usually is. But an FHA loan is an exception to that rule. The FHA isn’t too good to be true. Federal Housing Administration-insured mortgages exist for people like you — people who have flawed credit and enough money for a small down payment.

 

Mortgages for low credit scores

The FHA allows people with credit scores as low as 580 to buy homes with down payments of 3.5 percent. With a 10 percent down payment, the FHA will insure loans for borrowers with credit scores as low as 500. An FHA-insured mortgage can help you raise your son in a home of your own.

“If she’s 23 and wanting to do it, I say go for it,” says Elizabeth Rose, branch manager for Movement Mortgage in Dallas. “You might as well trade those rental dollars into mortgage dollars and actually get something out of it. An FHA is a great loan: You’ve got a low down payment, you’ve got tremendously awesome interest rates. Yes, it does sound too good to be true, but it is for real. It is legit.”

FHA is the insurer, not the lender

Now, the FHA is the insurer of loans. It’s not a lender. So you have to find a lender that will do a loan. That’s not always easy; lenders have tighter restrictions than the FHA has.

Your best bet might be to avoid the nationally known banks and consult with a mortgage broker. Explain that you have a credit score in the low 600s, that you want an FHA-insured loan and that it might have to be manually underwritten. “Can you manually underwrite an FHA loan?” is a good question to ask.

Permanent payments

You ask if there are immediate concerns about FHA loans. There is a concern, but it’s not immediate. The FHA is mortgage insurance. It’s a government program, so I like to call it public mortgage insurance. Unlike private mortgage insurance, you can’t cancel FHA insurance after you have 20 percent equity. To get rid of monthly FHA insurance premiums, you’ll have to refinance the mortgage. But that’s several years down the road, and you might have sold your first home and moved up to another one by then.

For someone with your credit score, the FHA costs less than private mortgage insurance.

For more information, read 7 crucial facts about FHA loans.

How much do mortgage lenders make?

A quiz: What are a mortgage lender’s total expenses per loan, and how much does a lender profit on each loan, on average? For expenses, we’re talking everything: commissions, salaries, the cost of owning or renting buildings, equipment and so on.

  • Expenses: $6,969. Gain: $1,773.
  • Expenses: $7,769. Gain: $3,169.
  • Expenses: $3,177. Gain: $9,669.

You’ll find the answer below.

Source: A Mortgage Bankers Association survey of independent mortgage banks and mortgage subsidiaries of chartered banks in the third quarter.

 

Bye-bye, refi

Mortgage rates skyrocketed after the election. The 30-year fixed averaged 3.69 percent the week before the election, and it jumped to 4.18 percent this week. That has been terrible news for people who could have, maybe should have, refinanced.

Before the election, 8.3 million homeowners would have benefited financially by refinancing, according to Black Knight Financial Services. That number has been slashed to 4 million homeowners, according to the data and analytics company.

“Though there are still 2 million borrowers who could save $200 a month or more by refinancing and a cumulative $1 billion a month in potential savings, this is less than half of the $2.1 billion a month available just four weeks ago,” says Black Knight’s Mortgage Monitor report.

Another perspective comes from Laurie Goodman of the Urban Institute. She says you have to cut at least three-quarters of a percentage point from your mortgage interest rate to make it worth the time and hassle of refinancing. “Using this assumption, refinancing would be economically worthwhile to 16 percent of current outstanding mortgages, down from 84 percent in 2012 and over 45 percent earlier this year,” she writes.

Mortgage rates this week

Borrowers can’t catch a break. Mortgage rates went up for the seventh week in a row, with the 30-year fixed averaging 4.18 percent. Before the election, it stood at 3.56 percent, so it has risen more than half a percentage point since then. Investors and economists believe that rates went up in anticipation of the Federal Reserve’s increase in short-term rates. Will that same Fed rate increase send mortgage rates down in the coming weeks? 

Quiz answer

The correct answer is A: The surveyed lenders had average expenses of $6,969 per loan and had revenue of $8,742 per loan, for an average gain of $1,773.

 

 

 

Courtesy of  

 

Posted by Deborah Blue & Marcus Robinson on April 28th, 2017 10:51 PM

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