Long Beach, Ca. The big debate in Congress right now is not whether to raise loan limits for fannie mae/freddie mac but how much to raise them. You see if the new bill passes, the new loan limit will be for 125% of the median sales price in a community. For example, In Orange County, California, the average sales price is $565,000.00; therefore, the new conforming loan limit would be $706,250.00
1). Home-buyers will be able to get better interest rates for purchases and refinances. This is because the current jumbo interest rate (for loans above $417,000.00) is between .5 and 1% above the conforming loan rate and that can make a big difference on a $400 to $500 a month.
2). Most property owners that currently have jumbo loans(more then $417,000) will attempt to refinance to lower their rates. Bond traders say that such refinancing would mean that bondholders and investors would get their money back, but then have to reinvest at lower rates, this will create demanding pressure to get higher returns and compensate for
3). Borrowers will more options. First time home buyers will be able to reach higher to purchase their first home. Interestingly, you might say that the new law will only help the affluent family base in Southern California; that is, it will help the families that don't really need any help who already have good mortgages, good credit and lots of reserves. After-all, who needs a $700,000.00 loan anyway?
Another side note: If something is not done to shore up the mortgage industry, there are going to be fewer and fewer lenders to choose from because many have already gone out of business. If something is not done quickly there is going to be a landslide of mortgage brokers leaving this industry.
The plan to raise the loan limits in currently being reviewed by the Senators, of which, several feel that the government has already taken on too much risk considering that these quasi government agencies are the only real big players purchasing loans right now.
The pressure is on for the government to do something quick considering the fact that there are currently approximately 1.25 million foreclosures in the United States with California having over 400,000 of those foreclosures.
Comments(0)