Drop in Loan Limits Has Many Concerned

12 09 2011

In less than a month, Fannie Mae and Freddie Mac will scale back the size of loans they buy from lenders, which some industry groups are saying will hurt home sales and could further dampen a housing market recovery. The drop in the conforming loan limit may make it more difficult for some buyers to purchase homes in expensive markets, housing experts say.

The current loan limits are set to expire Oct. 1. If an extension isn’t granted, the maximum mortgage amount in high-cost areas will drop from $729,750 to $625,500 (although that limit will vary throughout the country).

Some banks, such as Bank of America, have already stopped taking new applications for jumbo loans at the current rate so that they can process the ones already in the pipeline in time for the Oct. 1 deadline.

The drop in the conforming loan limit is expected to impact 2 percent of homes nationwide, but will have a much greater effect in some areas. For example, some analysts say 10 percent of the housing market in New York will be affected.

Pamela Liebman, CEO of New York real estate company the Corcoran Group, told USA Today that the new loan requirements will “put a lot of buyers out of the market.”

Meanwhile, lobbying efforts are continuing, as several industry groups, including the National Association of REALTORS®, are urging Congress to act quickly on a two-year extension to maintain the GSE loan limit at $729,750.

Source: “Coming Loan Changes Could Squeeze High-Priced Home Markets,” USA Today (Sept. 6, 2011)

Obama Announces Mortgage Refinancing Plan

12 09 2011

President Obama vowed to help more Americans refinance their mortgages during his speech to a joint session of Congress on 9/8/11.

“To help responsible home owners, we’re going to work with federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4 percent,” Obama said during his speech. Such a move would “put more than $2,000 a year in a family’s pocketbook and give a lift to an economy still burdened by the drop in housing prices,” he added.

Obama’s speech provided no specifics about the refinancing plan. He used the speech mostly to preview his American Jobs Act, a bill that would include tax cuts for small businesses, extend unemployment benefits, and provide other aid that would set out to help workers and spur more jobs.

Some critics said Obama’s speech did not contain enough to help the ailing housing market.

“That’s not the bold stroke that I want,” Mark Vitner, a senior economist at Wells Fargo, told HousingWire after the speech. “It’s not just refinance; we want people to be able to sell their homes.”

Some housing advocates said more needs to be done to address the massive number of foreclosures plaguing many housing markets.

“To get the economy moving forward, we simply must address the millions of people in danger of losing their homes to foreclosure,” adds Orson Aguilar, executive director of research group The Greenlining Institute. “This massive shadow inventory is a dead weight on the housing market and the whole economy, and we can’t ignore it.”

Some housing advocates praised the president’s refinancing proposal, saying it will help underwater home owners lock in record low rates and lower their monthly mortgage bill.

Source: “Obama Pushes Infrastructure Bank, Pledges Housing Fix,” American Banker (Sept. 8, 2011) and “Obama’s Job Plan Doesn’t Do Enough for Housing, Critics Say,” HousingWire (Sept. 8, 2011)

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