Jumbo home loans start at $417,100 and above. A new bill could be push conforming loan limits up to $729,750 and make jumbo mortgage loans anything above $729,750. This will be a major move to offset the housing price and sales decline. As a result, this will be an increase the mortgage loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). The critical role that Fannie Mae and Freddie Mac (GSEs) play in providing liquidity to the mortgage market has never been more evident than it is today. The national sub-prime meltdown has had a dramatic impact on both the cost and availability of mortgages in many markets. Since August 2007, the interest rates for jumbo borrowers have been more than 1 percentage point higher than conforming loans, which can cost homeowners up to $400 month in higher interest payments.
Raising the GSEs’ conforming loan limit will provide immediate relief to borrowers and alleviate downward pressure on our already fragile housing markets. According to the National Association of Realtors®, increasing the GSE loan limit will result in more than 300,000 additional home sales and strengthen current home prices by 2 to 3 percent.
I also believe that increasing the FHA loan limits is critical to helping bolster our fragile housing market. Current law restricts FHA loans to levels well below the median home price in many areas of the country and caps loans in high costs states at $363,790. These limits are preventing many homebuyers from using FHA to purchase or refinance their loan. The proposed provision will increase FHA loan limits nationwide by raising the floor to $271,050 and the limit to 125% of local median home prices. These increases will help an additional 138,000 Americans purchase and 200,000 families refinance their homes safely and affordably.
Would you rather pay jumbo mortgage rates or conforming rates? It’s a no-brainer answer if you ask me. If the bill gets passed, and it should, you can expect many homeowners who fit into the jumbo mortgage area to refinance and buyers who were on the sidelines to find better mortgage programs and with lower rates for purchases. Homeowners will also feel some relief as home values start stabilizing with the increased sales activity. In addition, world financial markets could calm down, as well as the employment data. It sounds like a win-win situation for everyone; bargain purchase prices for buyers who were on the fence and refinances with lower mortgage rates for homeowners using conforming loan amounts and stabilizing prices.
By: Mario Olivera
Posts Tagged ‘Fannie Mae And Freddie Mac’
Refinancing With Higher Conforming Loan Limits
May 30th, 2010Government Aid For Refinancing Home Loans
January 22nd, 2010
Today is a special day for many people, the Government and banking institutions can’t make up their minds and the markets are out of control!
But, many people in debt and other financial stress face the various serious business of foreclosure on their homes. To prevent that from happening many will turn to refinancing home loans to bail them out of a bad situation.
One major problem is that there are many companies offering refinancing home loans, trying to cash in on the ever increasing refinancing home loans market, but not all these refinancing home loans actually benefit the emotionally and financially distressed homeowner who is on the brink of losing everything.
At this point in time, the financial lenders have dictated the terms of the refinancing home loans and homeowners, especially with limited resources and poor credit standings pretty much had to accept the terms regardless of how costly those terms would be.
Unfortunately, many homeowners are dealing with higher adjustable rates on their mortgages, but the value of their homes is not increasing. Often time since it is becoming increasingly difficult to sell homes in this market, the equity on the homes is decreasing. This makes refinancing home loans even more difficult resulting in heavy financial setbacks from having to use personal money to help refinance.
The US government will be intervening to help prevent the foreclosure epidemic from totally crippling the economy. The government intends on pouring an additional 300 billion dollars into new mortgages. This way the private financial institutions can offer loans to even the most financially devastated homeowners in an effort to save their property from foreclosure.
A good government selling point is that the American taxpayer will not pick up this new funding burden for refinancing home loans. It will be the government sponsored Fannie Mae and Freddie Mac insurance programs that will pick up the refinancing home loans on mortgages that are in jeopardy. The Fannie Mae and Freddie Mac government chartered organizations will buy the mortgages directly from the financial lenders.
There are drawbacks for private lenders. They will be obliged to refinance loans at less than the value of the home itself. This measure means that banks and other lending institutions will sustain losses from this intervention. While homeowners benefiting from the issuance of these new refinancing home loans would be required to share their profits with the government upon the sale of the property.
The government will also benefit from this funding by collecting fees from financial lenders and from the homeowners as well.
There will be a new agency that will coordinate the Fannie Mae and Freddie Mac programs with the participating financial institutions.
It is expected that close to 500, 000 homeowners could benefit from the new refinancing home loans.
After the initial year of operation this new bill will establish a program to generate affordable housing.
This new government bill has been hailed by some of the economic experts as a good jolt to the sluggish economy and a lifesaver to the homeowners who really need it.
Thanks for reading,
By: Denis Darling
Refinance Home Loan Mortgage Rates Fall Sharply
November 15th, 2009
The mortgage industry has experienced slow application activity over the past several months, but that jogging pace may turn into a sprint as mortgage rates fell to historical lows recently. On November 25, the government announced some major credit stimulation initiatives in a bold move to bolster the depressed housing and mortgage markets. On the news, home loan rates tumbled by one-half percent, a move seldom encountered in the mortgage business. Three major components came together to create the sharp drop. First, the Treasury announced that they would now guarantee Fannie Mae and Freddie Mac debt and purchase up to $100 billion of that debt, thereby bolstering investor attraction to the safety of their issued bonds. Secondly, the Treasury announced that it would purchase up to $500 Billion of Fannie, Freddie, and Ginnie securities, creating much needed liquidity in the mortgage markets. Finally, Treasury yields dropped in a major one-day move, almost one-quarter percent on the 10-Year Treasury bond.
The result of this perfect storm of financial news was a one-half percentage point drop in mortgage rates and a potential beginning for stabilization in housing. Historically low mortgage rates may be just the stimulus needed to drive potential homebuyers off the fence to begin the offering process. After the government announcement, many lenders were offering par rates in the 5.5 percent range for 30-year fixed rate mortgages. Home loans at this price may be a hard deal to pass up for those refinancing loans and purchasing homes, especially in light of the roller coaster ride that mortgage rates have taken so far this year.
On the refinancing front, although interest rates are low, home prices continue to deteriorate across the country. The National Association of Realtors recently announced that sales of existing homes fell by 3.1 percent in October, and the median home sales price plunged 11.3 percent from a year ago to $183,000. On this news, it’s important to keep in mind that a homeowner’s qualified refinance home loan interest rate may not be as low as advertised offer rates, if their loan-to-value (LTV) ratio exceeds 80 percent. So, it’s a good idea for those considering a mortgage refinance to get a handle on the value of their home, before they start shopping rates. The spread appears to be tightening for higher LTV home loan scenarios, but those refinancing over 90 percent of their home’s value will most likely get the best deal with an FHA refinance.
As for the rate outlook ahead, many feel that the current low mortgage rates will continue for a while. Whether they decline even further is anyone’s guess, but a leveling in home prices could be just the medicine needed for further rate dips.
By: Jim Bisnett