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Why the uproar about mortgage programs & higher loan limits ???

against current loan limits

Loan limits are going up, loan limits are going up. First off, between the House, the Senate, and the President, they are still trying to finalize the figures so the President will sign off on the new bill. They are now recomposing such numbers to possibly include in the President's economic stimulus package. Why do you ask? Because by raising loan amounts, it will also in many ways, add more money to the economy. For any of you who aren't economic majors, it is to prevent a recession that we could possibly be facing. What I hate about the term recession is that it has a definition meaning when there is a decline in GDP for 2 consecutive quarters or more. In my honest opinion, we have been in a slight recession in the last several years and not just because of real estate. But since my thoughts don't fit the true meaning of a recession, this is the reason why the government is jumping through hoops now, because they now fear a recession. That and being an election year. But that is a whole other topic. For more information on how a recession works, here is a great article on "How Recessions Work".

call to action

Call to Action -- What can be done about the economic mess that we are in today? Possibly let the market work itself out? But there is more to it than that. John F. Kennedy in his inaugural speech once said, "Ask not what your country can do for you, Ask what you can do for your country."

Here is a concern that I have about all of this talk, about these programs such as the FHA Secure loan, the Presidential rate freeze plan, and several others. They all sound great on paper, but the reality of it is, that it will help several, not many. The same argument that I have with raising the loan amounts, both conventionally and through FHA. Yes, it will help some peole refinance. But what are the actual causes of foreclosures? Will many be able to even qualify for these higher loan limits? If I had to bet, I would say about 70% or more won't be able to. Sure, this will offer much relief in the New York and California markets, possibly some of the New Jersey and Connecticut / Illinois markets also. Remember those stated income loan programs, allowing people to use more income that they didn't have, to qualify for these programs. Do you want a sad story of someone trying to make it and they can't, because these programs are primarily set up to help those that don't need the help as much. Good people can finish last......

What can we do about this? Write our Congress, explaining to them that the people that are trying and have proved it, are the ones that need our help. Stop with the smoke and mirrors, at least in my opinion. Why can't we all be on the same team and not divided by specific parties. I thought this was America and that we should be helping each other!!!

handshake Conclusion : At least people like William Archambault are putting their ideas down on paper for us to consider. Please read his most recent idea. A Simple Idea Another call to action is the real estate industry, especially those loan officers who help people get into these homes. Stop selling me that FHA isn't that good. Learn your programs, because numbers don't lie. FHA mortgages vs Conventional mortgages - A True Comparison And if you are going to criticize a comparison such as this, please read every detailed supplied, before you form your opinions. All I can say to the general public, why many fight the FHA programs, is one of 2 reasons. They either don't understand the actual program, because more work goes into them, or because their company isn't FHA approved. In some cases, some loan officers aren't in this type of market, such as Matthew Blum. Per our conversation, the majority of his market are jumbo mortgages and hard money loans. Will the new raised limits help his market, you betcha. Overall? Not really, because you still need to qualify as a full doc loan in most cases. If you didn't read this the first time, please read this now. Good people can finish last.....

And just one more thing..... Please, please stop listening or watching these late night infomercials on TV telling everyone that they can buy homes for nothing. Be careful of those on TV promising you better credit results if you buy their CD. Overall, talk to a mortgage professional and not someone boasting their success in the business on TV, who is now selling new short cuts.

Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 01/29/2008 03:13 PM

Comments (10)

recession, economic stimulus package, call to action, congress, mortgage loan limits, fha loan limits, fha, nehemiah program

This post has been included in New Jersey Information Camden County, NJ Information Cherry Hill, NJ Information

10 Comments on Why the uproar about mortgage programs & higher loan limits ???

JAN

2008

Jeff - Some interesting thoughts and for my money, people can't read enough William Archambault. I don't think you'll find a better source of knowledge and experience in Real Estate. As far as your last paragraph, I couldn't agree more.

Jeff, I can not wait to see if they raise the limits. This would be just what the doctor ordered.

Jeff, Totally agree with your thoughts and especially that we are in a recession. We've been experiencing recessionary measures for quite a while now. And like you said, it's so true that when you look at something on paper and the reality of it are two distinctly different things. I have an issue with some of these proposals because they will not help the many.

JASON..... thanks... would loved to have heard a few of your thoughts. Or are many of us afraid to put it out there? ;o) And that wasn't directed towards you. I hear so many people complain, but then nobody really steps up to the plate to put their thoughts out there. Ah, just venting... ;o)

DANNY.... they will raise them, they have agreed to it. But hey, it is gov't, so they can change their mind also. But would love to hear why you think it's what the doctor order. In my opinion, from what I have seen and have heard, it will help, but it won't be overwhelming as so many think it would. Talk to people around you or in other states, people aren't making nearly enough to be approved for higher increases in loan amounts. And a lot of these consumers have a lot of back end debt. Personally, I just think qualifying for these larger amounts will be tough.

MARC..... thanks.... even if you didn't, I would love to hear your opinion to as why not. The more people that I talk to in the last several weeks, who are barely qualifying for minimal loan amounts now, with decent jobs, just won't qualify for the higher loan amounts. My basic issue, those that actually need the help, won't qualify, Thanks for your input and feedback.

Would you rather see this or the interest rates of the late '70s & early ;80s? I'm curious.

Jeff, et al, we are in a collective pickle. Even those of us who are not in a "crappy market" are in a credit limited market in which the growth potential is more than mildly staved. The loans that got 14% of my customers into homes in 2006 are gone. So why was my business down over 60% in 2007 if only 14% of the loans disappeared?

1. Fear. The media is almost solely responsible for the level of fear. The government has the responsibility of quenching fears. Lowering the interest rate helps and telling people that more of them will be included into this "conforming group" is another. I agree with Jeff - having the loan available is one thing; qualifying for it quite another.

2. Knee-Jerking Lenders. When pass-through lenders disappear in a matter of about 9 months that's a major problem. When major lenders shut-down their wholesale division (leaving 63% of customers out in the cold) that's another.

3. Over Extension of Owning Power. This is not leverage - this is autonomous theft. People stole from their own future in more ways than were even possible 20 years ago: Buy now, pay for the junk you buy today 2 years from now when it's worthless. 0% teaser rates on credit cards. Sign the forms and drive away auto lending. You think the mortgage industry is alone in this? Ha! Wake up because it's too late to smell the coffee - it's being poured on you!

The liquidity problem is nothing compared to the shortage of common business sense: ladies and gentlemen watch the price of your bread, milk and petroleum products. You ain't seen nothing yet if this delicate balance is upset by runaway inflation. Sure, they'll raise the limit - some people will qualify but we'll see how many. The problem with the S&P/Case-Shiller counted "victims" is they overstated their income to buy homes that cost more than they were worth with income and assets they didn't have.

BUT my parting words are: "This just may have a windfall benefit for very short term long enough to reverse the recessive nature of today's economy and if, by narrow chance, it does generate enough recovery to stave off runaway inflation we'll see a total repeat of it again in about 15 to 20 years but called by a different name."

Have a grandtastic evening!

From the California perspective we need to raise the conforming loan limits, and honestly this should have happened years ago. This will allow people that are in ARM's, with no equity (because they got 100% financing), and their current loan is above the $417,00 conforming limit to be able to refi and most likely stay in their home at a payment similar to what they currently have. That is a good thing! Most of these people simply don't qualify for a 30 year fixed under the jumbo programs, which have rates as much as 2-3% higher than the conforming programs. These people are literally walking away from the property...or staying until the bank forces them to move. I just read a report yesterday that indicated the biggest flood of foreclosures will hit the market in the 3rd quarter of 2008. If that happens prices will continue to plummet and obviously families will lose their homes. We can argue the how and why this happened later. The simple truth is we need to help people keep their homes and this plan, while far from perfect, can do that.

KENT..... in all honesty... 2 things... first off, I wasn't in that market back then. In regards to my first part, leading into my 2nd part, I am not sure how values did. But from knowing what I know.... people qualified with 18% rates, because home values were down and low.

Think about it... too many people focus on rates. Lower rates don't always solve the problems. This is my opinion, but I would bet to find that many would agree with that statement. We are in a big pickle here and low rates and higher loan amounts won't solve the problem. It might prolong the problem, but wait till the end of this year, when the bleeding is so great, that band aides and tourniquets won't even help. Just my humble opinion, but I would love to hear from some truthful economists out there. What is your answer?

KEN.... I agree, fear is a big reason why the market was stagnant many times. Hence why it ticked me off when I heard a loan officer cry the blues last week, when rates went down, because he was going to be overwhelmed with going after old clients. Why was I ticked? because he should have been in contact 2 months prior, when rates were still low. They only dropped a 1/4%, and he proved to me that he was just like the public. Getting back to your statement, basically lower interest rates are just curbing fears, until reality sets in.

I loved your number 3.... I have been saying this for a year now, that they should have smelled the coffee back then. Great statement.

And your statement about the liquidity issues and what you expect will happen to other goods and services, right on the money. Overall, what a great comment, hitting on so many issues. Thanks for your feedback and input, this was great.

JASON L. .... let me ask you this question. Do you know how many homeowners went stated, with the stated mortgage programs last year? I don't know the numbers, but a lot more than you would think. And going back to my statement, that higher loan amounts won't help as much as many will think. Raising loan amounts won't raise home values either. You will need to qualify 8 out of 10 times as a full doc with these higher loan limits. It will be a small percentage. This is my opinion, but let's wait 6 months after they raise the amounts and see what happens then. My guess, still, a lot of foreclosures. You need income to keep up with the values, hence why so many went stated.

In regards to this report stating that there will be a flood of foreclosures in the 3rd quarter.... do they know why? What the reason will be behind these? Not because they didn't make their payments. But what made them miss those payments. That's what we need to focus on.... Thanks for your input....

JAN

2008

Jeff, not sure about the stated numbers either...but I do know many went with 100% ARM's at teaser rates, and that seems to be where most of the foreclosures are coming from. And you are right on about values...so it could be tough to refi. But, it is much easier to qualify for conventional financing vs. jumbo and the rates are lower. Many of the people who went this route actually have decent income, they just had no down payment. So raising the conforming limits should open doors for a lot of people. Value may be an issue, but qualifying could be easier for many people who just had no chance under the jumbo rates.

I work with a lot of lenders that are modifying the loan terms to try to keep people in the home, and most homeowners I talk with are open to that idea. So it seems to me that most people want to keep the home if at all possible. As for missing payments it is most often, in CA anyway, because the rate adjusted and they can no longer afford to make payments. Pure and simple. Now they knew this was coming, and blame must fall to both the lender and consumer, but again we are past the point of asking why and need to take action. As you said, "Time will tell."

JAN

Jeff,

It's only 359 days so I'm not really a year late.

I was doing research on 'branding" and wanting to illustrate why I always include my name as "William J Archambault Jr" not just "William Archambault" when lo this pooped up.

I'm glad I found it, thank you for the kind words!

Looking back I think we were wrong, we were offering solutions when the people were looking for smoke and sound bytes.

Bill

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