Increased FHA loan limits for high-cost areas were announced and effected yesterday (apparently Wells Fargo will begin writing in about two weeks). Today, the new conforming loan limits are expected to be announced. And if Kathleen Pender is correct, “Fannie and Freddie are expected to begin buying the bigger loans in about a month.”
Still no word on any new conforming guidlines (down payment, credit score, loan-to-value and debt-to-income ratios). Any tipsters within (or with “intimate knowledge” within…) the agencies?
And an FHA aside: “The FHA program has been sporting double-digit delinquency rates for years…We are potentially shifting risk from the private market onto the federal government. It puts the taxpayers on the hook. No doubt about it.”
∙ FHA boosts home mortgage limits [SFGate]
∙ Loan Limits Have Been Raised For FHA-Backed Loans In California [SocketSite]
from what i understand, banks are incredibly excited to change much. though things are official now banks are trying to make sense of it and are scrambling to make rules and figure out how to actually make it work. i hear that banks are going to set up a tiered system. in other words, X loan will cost y% and x+50K will cost z%. also, conversation piece: why would the banks want to lower their interest rates for new loans from qualified borrowers and make “less” money? In other words, they are writing off record losses and need to make money off of the people that are actually qualified. so…. i heard some banks may never change their rates based on jumbo to conforming. that said, i wouldn’t be surprised if some banks actually made that their niche.
FHA rates are rising alarmingly.
They went up about 1% last *week*, from 6.1% to 6.16% when official rates are falling and expected to fall further.
When people start talking about the “right thing to do” is for the lender to give the borrower some of the principal, people stop investing in 3% down mortgages, which are only being written by the FHA.
FHA is just a government insurance policy. The government can change the rules at any time. Investors are starting to wake up to that fact and the interest rates are rising.
It wouldn’t be surprising to see 7.5%-8% fully insured FHA rates by the time loan 1 gets funded.