A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac.

Each year, the government sets the maximum allowable loan size for a conforming mortgage, based on "typical" housing costs nationwide. 

Loans in excess of this amount are typically called "jumbo".

While home prices increased from 1980 to 2006, so did conforming loan limits.  Since then, however, as home prices have dipped, the conforming loan limit has held.

Now, in 2010, for the 5th consecutive year, the government set $417,000 as the nation's conforming mortgage loan limit.

The 2010 conforming loan limits, as released by the government, are:

1-unit properties : $417,000

2-unit properties : $533,850

3-unit properties : $645,300

4-unit properties : $801,950

But conforming loan limits don't apply to all U.S. geographies equally.  As a result of various economic stimuli since 2008, the government now considers certain regions around the country "high-cost" areas.  In these areas, conforming loan limits can range to $729,750.

For today's home buyers and homeowners that can manage the higher monthly payments, 15-year fixed rate mortgage rates look attractive as compared to comparable 30-year products.

The 15-year/30-year interest rate spread is near its 5-year high.

Despite lower rates, however, homeowners opting for a 15-year fixed mortgage should be prepared for its higher monthly payments.  This is because the principal balance of a 15-year fixed is repaid in half the years as with a standard, 30-year amortizing product.

As compared to 30-year terms, 15-year products repay 3 times as much principal each month.

Versus a 30-year, 15-year fixed mortgages have a few downsides worth noting.  The first is that, because 15-year mortgages are heavy on principal and light on interest, homeowners who itemize tax returns may have to claim a smaller mortgage interest tax deduction at tax time.

Another negative is that the sheer size of the payment.  If you run into fiscal trouble down the road, the only way to reduce the monthly obligation is to refinance into a 30-year product and that costs money to do. 

In other words, be sure you can manage the payments over the long-term before you opt for a 15-year term.   If you can manage it, though, the rewards are tangible.

At today's rates, a 15-year fixed and 30-year fixed costs $230 extra per $100,000 borrowed.

Congress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday. 

The up-to-$8000 tax credit's expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.

The program's basic eligibility requirements remain the same:

• Buyers can't purchase the home from a parent, spouse, or child
• Buyers can't purchase the home from an entity in which they're a majority owner
• Buyers can't acquire the home by gift or inheritance
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

For one, the definition of "first-time home buyer" has been expanded to include most homeowners with at least 5 years in their current home.  "Move-up" buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.

This means that you don't have to be a true first-time home buyer to claim the "first-time home buyer tax credit".

Other eligibility changes include:

• The subject property's sales price may not exceed $800,000
• The subject property must be a primary residence
• Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction.  This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his "normal" tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.

According to the governments numbers, home values edged lower last month.

The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.

The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index than its private-sector cousin, the Case-Shiller Index.

But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:

1. Is considered new construction
2. Is a multi-unit property
3. Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring.  FHA represents about one-third of all mortgage loans in 2009.

Because of these exceptions, some analysts label the Home Price Index incomplete.  The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.

In light of these shortcomings, therefore, what's most important is to recognize that both of the "popular" home valuation reports show similar patterns -- home prices have leveled and are showing signs of a rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

With crude oil at its highest levels since October 2008, retail gas is up 8 cents per gallon this week.

It's bad news for home buyers and mortgage rate shoppers.  The same force that's driving oil higher is linked to rising mortgage loan rates.

We're talking about the weakening U.S. Dollar which is now at its worst levels versus the Euro in 15 months.

Crude oil is priced in U.S. dollars, by the barrel.  When the dollar loses value, more of them are needed to buy the same barrel of oil.  As a result, predictably, the price of crude oil goes up.

Now, there are other reasons why crude oil is rising, but the fading U.S. dollar is one of the major ones and it's why we're addressing it.

The dollar has a similar impact on mortgage rates.

Mortgage rates are based on the price of mortgage bonds that -- like crude oil -- are also denominated in dollars. As the dollar loses value, so do mortgage bonds.  This causes demand for bonds to drop and prices on bonds to fall.

Because bond prices and bond rates move in opposite directions, mortgage rates rise and this is precisely what's happening on Wall Street today.

Since touching a 5-month low in early-October, mortgage rates have tacked on as much as 1/2 percent, depending on the product.  Moreover, with the dollar showing no signs of a rebound, the upward pressure on rates should continue.

The HVCC code of conduct is the result of a legal settlement with the attorney general of New York. It is applied nationwide. And it should be considered a case study in the value of the legislative process: If the HVCC had been a bill introduced into Congress, it would have never passed without having undergone drastic changes. But it wasn’t a bill and it isn’t a law; it’s a legal settlement by one state’s attorney general, imposed on all 50 states.
Every public policy has unintended consequences. But that doesn’t mean that the consequences are unforeseen. Plenty of people foresaw the unintended consequences arising from the HVCC. Because it didn’t go through a legislative committee system, because it wasn’t passed by two houses, and because it wasn’t signed by a governor or president, those foreseeable but unintended consequences could be — and were — ignored.  As a matter of fact Cuomo was a paid board member of AMCO, an appraisal management company. His buddy is Ed Davidson (a major campaign contributor of Cuomo) and was the CEO of AMCO, which was sold to SIRVA and renamed Valuation Services, LLC. It is reported that Davison has rights to future income from Valuation Services, LLC. (and I wouldn't be surprised if Cuomo does get a couple of bucks from it either, but that's pure conjecture on my part.)
HVCC was supposed to include Independent Valuation Protection Institute, which is a place to report fraud and coercion. That was never funded so AMCs are unregulated. It was rumored that Ed Davidson was to head the IVPI. As it stands, HVCC is nothing but a profit center for the big banks who own them.

After 18 years in the mortgage industry, I can’t believe that such poorly written legislation is being enforced and the only loser is the consumer. All wholesale lenders have an appraisal review process, there is no way to pay off or entice an appraiser to bring in a value that isn’t supported by comps. If you do the appraisal will be cut and the appraiser will be placed on the black list. AMC’s can just as easily enticed, so how does this solve the so called problem? The bottom line is that consumers will pay 3.8 billion dollars more in appraisal fees this year… What a Gong Show!

With The Year Half-Over, How Accurately Did Economists Predict 2009

At the start of the year, the "experts" made a lot of predictions about the U.S. economy and what to expect in 2009. 

• Some said housing would rise
• Some said housing would fall
• Some said mortgage rates would rise
• Some said mortgage rates would fall

And nobody predicted just how big the government's stimulus package would be.

Now, on June 30, with the year officially half-over, it's as good a time as any to remember that people are much better at interpreting the past than predicting the future.  Economists can make educated guesses about the future, but they're guesses nonetheless. 

It's like watching the Weather Channel.  A meterologist can look at the data and say it's going to rain next week, but the forecast is never 100%.

So far this year, mortgage rates have been up and down, credit availability has been higher and lower, and home prices have varied immensely from neighborhood to neighborhood.  These are not the types of predictions we get from the pundits.

There's another 6 months until 2010 and there's no reason to expect the current trends to change. 

The world is unpredictable and so is the U.S. economy.  Therefore, consider making your personal finance decisions based on the information at hand today instead of on an educated guess about the future.

After all, the weatherman's been wrong before.

When the government nationalized mortgage lending in September, housing analysts predicted lower mortgage rates.

For a brief two-week stint, they were right -- post-takeover, the 30-year, fixed rate mortgage fell below 6.000 percent nationally for the first time in 7 months.

Since then, however, mortgage markets have reversed.  Rates are now at pre-takeover levels.

Now, this isn't to say that the nationalization was a failure -- far from it.  The government's takeover of Fannie Mae and Freddie Mac accomplished two very important goals:

1. It restored failing confidence in the U.S. mortgage markets
2. It opened legislative channels for faster, more relevant housing reform

And, long-term, most people agree, these are essential elements for a U.S. economic recovery.  Over the short-term, however, the plan has not delivered the sustained low mortgage rate environment that was envisioned. 

The biggest reason why rates are higher is because of Wall Street's manic trading behavior.  When the economic outlook shows hints of sun, investors sprint to risky stock markets; when it shows signs of gloom, they flee in favor of ultra-safe treasuries.  The buy-sell patterns have led to some of the wildest trading days on record and it's not what the Treasury expected.

See, when the takeover was first announced, mortgage-backed bonds were elevated to "government status".  This created new demand for mortgage bonds which helped to push down rates.  But, in the weeks that followed, the world's credit markets unraveled and traders sought the dual comfort of safety and liquidity in their portfolios.

That's a combination that only U.S. treasuries can provide.  Versus "true" government bonds, mortgage-backed securities are just quasi.

We can't know where mortgage rates will move for certain but, for now at least, the 4 percent range some had predicted is out of reach.  Until credit order is restored globally, expect volatility to continue and rates to remain up.

Given the stock market's recent performance, it's not surprising that gasoline's falling prices are garnering very little attention. That doesn't make it any less relevant, however.

Since peaking in July, gas prices are off by 20 percent.

Falling gas prices are an important positive for the U.S. economy because less money spent at the pump means that more money is saved per household for everyday items including food and other staples.

In addition, consumer spending makes up two-thirds of the economy. 

Therefore, falling gas prices may lessen the impact of a forecasted recession.  Because Americans are notoriously poor savers, the extra cash-on-hand is likely to get spent which will, in turn, push the economy forward through the upcoming holiday shopping season.

So, just as inflation can bad for mortgage loan rates, so can recession.  And while recession won't always cause mortgage loan rates to rise, right now, it's one of the factors driving rates higher.  Falling gas prices may help keep that scenario at bay.

Buyers are returning to the housing market.

Each month, The National Association of REALTORS^® tracks homes under contract to sell, but whose closing has not yet happened.  It calls them "pending sales" and publishes a monthly report to quantify them. 

The Pending Home Sales report is important because it's meant to predict future home sales activity.  History shows that 80 percent of homes under contract will "close" within 60 days, and most of the rest will close within 120 days. 

If Pending Home Sales are up, it's believed, actual home sales will be up, too.

In August, Pending Home Sales jumped 7 percent from the month prior, returning to levels not seen in over a year.

The report's strength suggests that buyers are returning to the housing market, continuing the trend that started in March.  This is tremendously good news for sellers because more buyers on the hunt means more demand for homes which, in turn, leads sale prices higher. 

The Pending Homes Sales report is not a perfect predictor, however.  For one, it's not measuring an actual sale -- just the expectation of one.  In addition, it only accounts for "used" homes, ignoring new construction. 

But that aside, the strong uptick in August tells us that home buyers are re-engaging at a quickening pace and finding that "now" is a good time to buy real estate.  When buyer demand rises, the real estate market as a whole isn't usually that far behind.

(Image courtesy: The Wall Street Journal Online)