A good reminder from Julian Hebron at Residential Pacific Mortgage:
Be advised that super-conforming loans up to $729k will be gone as of December 31. Those loans have to fund, clear all lenders’ books, and be in the hands of Fannie or Freddie by December 31, so many lenders are not accepting these loans past the end of October, but there are some players that will go a bit longer. Anyone looking for these loan amounts needs to consider their timing.
Get them while you can. And keep in mind that once the Economic Stimulus Act of 2008 and it’s $729,750 conforming loan limit for San Francisco expires, it’s the conforming loan maximum of $625,500 or Jumbo market to which we’ll have to turn.
∙ Will San Francisco Suffer From Premature Loan Limit Reduction? No. [SocketSite]
∙ If Lowering Rates Isn’t Working, Perhaps Increasing Limits Will [SocketSite]
remember:
the govt can change this rule at a moment’s whim, so we don’t really know what the rules will be going forward.
this is one of the problems with all of the markets right now (RE, stocks, bonds, treasuries etc). nobody knows the rules, because they change so often.
thus, do not be surprised if this rule is extended or if it is changed in some way.
I am NOT saying this will be changed, so don’t invest based on these words… just know that the rules are changing so fast these days that we effectively have no rules. not a good situation, not at all.
I would prefer if we could change the definition of conforming from regional price to individual buyers income. No more than 4x income verified by 5 years of tax returns.
Get them while you can.
Maybe, maybe not. It all depends on where the market is going.
Think someone who buys a 900K property with 20% down. financing is 720K.
If prices go down another 10% or so, the same property could be worth 810K one year from now.
Since then, say you saved 20K.
Your financing becomes now 610K, within the new jumbo limits.
I think the market will be more than 10% lower than today next year, but that’s just my uneducated opinion. I’ll stay a renter until buying makes more sense.
“Get them while you can”
It is already too late. http://money.cnn.com/2008/10/16/real_estate/end_of_low_mortgage_rates/index.htm?postversion=2008101610
Essentially, the cost of the purchasing is 5% to 6% higher now.
So, it might be wise to wait for the rate to go back down….but then again, maybe it won’t. Who knows.
I have not encountered a single company who was offering loans under the new conforming amounts.
Apparently RPM offers these, but the only advantage I see from their website is 6.625% instead of 7% on a 15 year loan only. The 30 year is the same. The whole “conforming jumbo” thing seems not to have worked.
I was able to secure a jumbo conforming loan at a decent rate. It was a 30 fixed loan at 5.75% with 1pt. Not bad and now I am locked in long term. I had originally planned on doing a 5/1 arm but the spread between the 5/1 and 30y fixed was so small I decided to take risk out of the equation.
Patelco offers 30 year conforming loan rates up to $729k. The rate is currently 6.5%. They also offer Jumbo’s of up to $1M at 6.75$. No points on either of those loans. You can borrow more than $1M as well, you just have to go and talk to a banker and convince him you are a good credit risk, just like the old days. These are all 80% LTV loans.
Plenty of people are out there willing to lend money, smaller banks especially. The Chicken Littles who are quoting WFC 30 year jumbo rates are just trying to spread FUD.
FUD? LOL! All this crisis is psychological, is that it? The world is in a whirlwind of bank failures just because people spread false rumours!
Wells Fargo is a well managed company. They are sailing through this crisis and I am sure a lot of banks wished they had followed their lead in the past 5 years.
Dunno about the future though. But FWIW I think their conservatism is what saved them.
Addendum: I think the chicken little are the ones sitting on a huge bubble of debt (NV maybe?) who are seeing the pin coming a bit too close for their comfort.
I know people who overbid last year and early this year in Noe. Maybe they also overpaid…
Actually, I just refinanced my home during the banking implosion and paid down the principal to get under the jumbo conforming limit. So these loans are available. I almost waited thinking rates would stabilize but decided I didn’t want to take the risk of missing the boat with the higher conforming limits disappearing. Interest rate on my mortgage is now 5.5% for 30 yr FRM and my mortgage payment plus property taxes net of my tax shield is what a 1 bedroom in The Marina would cost me. I left SF and now live in a historic SFR in a high end neighborhood in Seattle.
A chicken little would be someone who is claiming that the sky is falling. Have I ever suggested that the sky is falling or over exaggerated the negativity in any situation? I think you have your metaphors a bit confused. The word you are perhaps searching for here is Pollyannaism.
A fair amount of any business cycle is psychological, or what Keynes called the “animal spirits.” Right now everyone is expecting everyone else to panic so everyone is deciding that the best course of action is to panic first.
A fair number of banks should fail as there was too much economic activity devoted to banking, which was mostly unproductive. That does not need to bring down the rest of the economy, though it might, if we use the wrong macroeconomic response.
@ fronzi,
So, let’s forget your incorrect usage of euphemism for a second.
What we have is s.s. folks quoting bankrate.com rates and other random rates derived from cursory internet searches. These posters proclaim that to be status quo. They go on to basically say that armegeddon is upon us due to these rates. That’s not worthy of commentary in your estimation?
So here’s your view. You’re like, let’s forget about that. Let’s talk about something different. Let’s talk about the people who already bought — people not posting here — and call them out instead. You “chicken little.” You’re sitting on a huge pile of debt!
What the heck. You can make that comment in 70% of the threads on here and your comments will find the reaffirmation they truly seek.
Welcome back fluj.
Patelco is a very conservative lender as well, which is part of the reason they money to lend in this climate. Lots of small banks are offering comparatively low rates now, since they did not get caught up in the securitization craze.
Now, come on. You have others quoting jumbo rates from internet sites of small, relatively unknown credit unions (Patelco, Penfed) with no evidence at all that anyone actually can get a loan at the cited rate, and that is more reliable than bankrate.com? That is a well-respected source of rate info, relied upon by the NY Times every day in its business page summary of rates, MarketWatch, and may others. I agree that one cannot just pick a single source (Wells Fargo) and declare that bank’s rates to be the prevailing rates, but are you seriously contending that jumbo rates have not risen significantly in the last couple weeks?
But what are we talking about, Trip? People will, as they should, look wide and far to find the best mortgages. We are not talking about Bankrate.com as being a decent indicator of general market trends. My point was directed at this foregone conclusion nonsense. The typical doom and gloom shpiel that finds its way into each and every ss thread. Brick and mortar has been the way to go for six months now. People who are actually in the market understand that. People who like to kibbitz about real estate on the Internet like to do cursory searches, see bad rates, and talk about how others are stupid.
I agree that buyers will, and should, look far and wide to find the best mortgage. But you have to agree that for any given lender, the jumbo rates that are being offered today are quite a bit higher than they were two weeks ago. Bankrate.com IS a decent indicator of general market trends and is widely relied upon by well-respected publications for exactly that purpose. It’s the relative change in rates that matters for this discussion, not the absolute lowest rate one can find on some internet site or the absolute highest. Rates are higher today, and once the conforming rate drops, which is very soon, the higher rate for jumbos reaches down another $100,000. That will have an adverse effect on SF sales and market prices because jumbo loans are the norm here. You can’t just pretend rates are lower than they actually are and use that pretense to support your broader argument.
Sure, use Bankrate.com if you like. It has 30 year Jumbo’s at 7.62% right now. This is a long shot from the 10% that someone (was it you?) was quoting on another thread.
Claiming that jumbo rates are now 10% is FUD. Claiming that they are trending up right now is not.
LIBOR has come back down, as the panic in the financial sector is easing and I believe that Jumbo rates will trend down soon, but we will see, won’t we?
Patelco is big Credit Union with something like 40 branches. They are serious about what they do and are not a fly-by-night operation. If they are advertising certain mortgage rates, you can be certain that they are available. I have been doing business with them for over 20 years.
No, I have never mentioned 10% rates or anything approaching that as reflecting the market. I know nothing about Petelco. The only point I was making is that bankrate is a well-respected source of rate information. As for FUD, there is a flip side, which is the ridiculously sunny fact-twisting and selective statistics that are constantly being thrown out there to claim that SF real estate is immune from the clear trend.
I agree that a decline in LIBOR will be very good for the economy (or at least is an indicator that the credit markets are looking better). However, I don’t think that is going to help mortgage rates in any material way. Those are much more closely correlated to treasury rates, which have risen quite substantially in the last week as the flight to safety eases and rates go up as a consequence. We’re all only guessing. But I don’t see much to support the idea that jumbo rates will ease. The root of the problem is that for jumbos, there is no Fannie/Freddie guarantee, and thus they are very difficult to securitize, meaning lenders/investors have to charge more to take on the risk. This risk is multiplied by the fact that high-priced areas (those where jumbos are prevalent) now seem to be set up to fall the hardest as a result of the credit squeeze. The attached article notes another unintended consequence of the bailout — Freddie/Frannie notes are not so comparatively attractive as other investments anymore, raising rates (for conforming loans only).
http://news.yahoo.com/s/time/20081017/us_time/thebankbailoutssideeffectrisingmortgagecosts#full
NVJ,
Chicken Littles: the ones saying the sky was falling 3 weeks ago and then begging for a bailout. The sky was not falling by far, and the bailout was not necessary.
RE created a virtuous circle: RE increases brought wealth which brought confidence which brought funding through risk which brought RE increases.
Now it’s creating a vicious circle: RE decreases suck out wealth which brings distrust which dries out financing which brings RE decreases.
The risk for the economy is another vicious circle: Less confidence brings less consumption which brings less employment which brings less confidence.
OK. Fair enough. Let it be quick then. Fiat money needs to disappear, then let’s get it over with fast please, instead of filling the breaches in the dam with more debt.
We have better use of our tax dollars than to save the blind and the reckless (WS, Bankers, Realtors, Flippers, Home-owers) from the mess they created.
Fronzi, I still don’t get why you went Henny Penny on ole NVJ.
Trip, two weeks ago the same crowd on here crowed about the slight LIBOR rises as surefire apocalyptic harbinger. Well LIBOR’s down. Are we out of the woods everybody? And the 10 year rate has both gone up and down the last week and a half. It’s down from where trading began Tuesday after Indigenous People’s Day. I question anybody figuring out anything substantial from the way the 10 year has behaved over the last couple weeks.
Nothing personal against NVJ.
But when someone calls any bear today a Chicken Little, it proves they’re stuck in a parallel reality.
The cheer-leading from the permabulls ultimately brought our country to its knees. Everybody’s hurting, even the wise and careful.
But now we have to pay REAL money to bail out irresponsible bulls when they cry uncle. And we should take it with a smile? No thanks.
Redfin indicates another 127 new mls listings today. They continue to come on to the mls in far, far greater numbers than sales. The interest rate issues discussed here are worth keeping an eye on, but the real issue is that regardless of rates, so many less can qualify for any loan and so many less appear willing to buy in a fast-declining market, that even if interest rates don’t rise or even fall, I don’t think sales volume will pick up much. Rates are just a tangent at this point.
By the way, the boy who cried fluj, I disagreed with that post about LIBOR rates, and many on that thread correctly pointed out that it would have a negligible effect on rates for new mortgages and only a small impact on existing ARMs. The curious link between the market turmoil and mortgage rates is that when indications are the world is tanking (which is bad news for about everyone), investors flock to treasuries which brings rates down. And as the news looks a little brighter, the money goes in the other direction, bringing treasury (and mortgage) rates up. Tough situation for the real estate industry.
But when someone calls any bear today a Chicken Little, it proves they’re stuck in a parallel reality.
Really? Even the ones calling for us to stock up on gold and ammunition? I think not.
But now we have to pay REAL money to bail out irresponsible bulls when they cry uncle. And we should take it with a smile? No thanks.
You have my 100% agreement on this.
“Interest rate on my mortgage is now 5.5% for 30 yr FRM and my mortgage payment plus property taxes net of my tax shield is what a 1 bedroom in The Marina would cost me. I left SF and now live in a historic SFR in a high end neighborhood in Seattle.”
This could be explain my situation as well, except one would have to substitute Chicago for Seattle. (I do still own some properties in San Francisco from a trust set up by my parents, but chose to leave for career reasons, and have the rental units operated by a private mgt. company.)
sounds like a good investment with dependable cash flow no matter what the economy is doing.