CFAH

The Mark Company provides a nice overview of lending standard changes in the works or on the way for Fannie Mae and FHA in general, and a few local lenders in specific, including a reminder that the “jumbo conforming” limit of $729,750 is once again set to expire at the end of this year (at which time it would return to $625,500).

TMC Lender Update – Q4 2009 (pdf) [themarkcompany.com]
If Lowering Rates Isn’t Working, Perhaps Increasing Limits Will [SocketSite]

Comments from Plugged-In Readers

  1. Posted by sfrenegade

    Heh, they should eliminate jumbo conforming entirely as far as I’m concerned and go back to market interest rates for expensive properties. Even $625,500 is too high for a limit.

  2. Posted by tipster

    Wow, DTI just went down by about 20%. That will either knock about 30% of the buyers out of the running or force them to lower their bids by 20%. Either way, prices have to fall as a result. That, and to a lesser extent, the increased credit scores is going to start to let more of the air out of the market. It looks like a controlled decline is being managed.
    I wouldn’t count on the jumbo conforming limits to drop back down, however. I think that will be extended at least for another year. It’s too easy to argue that with tighter loan standards, the higher limit isn’t much of an issue.

  3. Posted by Debtpocalypse

    Admirable marketing urgency.
    However.
    Anyone who doubts for even a moment that the pandering numbskulls and economic illiterates be-straddling the Potomac won’t extend the higher conforming-jumbo limit, renew the $8,000 (or more) tax incentive, while scheming for ever-new ways to toss public-debt-financed goats on the sacred alter of “homeownership,” is not paying adequate attention.

  4. Posted by Legacy Dude

    ^^^
    What he said.

  5. Posted by OneEyedMan

    Debtpocalypse –
    When posting in the future please try to be clearer about how you really feel.

  6. Posted by steve

    soon, everyone will be forced to rely on those super-expensive, impossible-to-get jumbo loans — like this one (from the same document):
    BofA: Special promotional rate of 5.875% with no points for a 30-year fixed for all Jumbo loans of $1 million+.
    yes, the apocalyse is nigh. in fact, I noticed traffic has been better all week, so maybe the rapture has already begun

  7. Posted by HappyRenter

    I was reading somewhere that the $8K bribe is terribly inefficient. According to surveys only 20% of qualified first-time buyers are saying that the $8K made the difference in their decision to buy a house now. So we taxpaupers are basically spending $40K for each one of these “encouraged” transactions.

  8. Posted by eddy

    The income restrictions are a joke on the 8k incentive.
    FWIW, I don’t think we’re going to see much further declines in the sub $1M price range, maybe 5-10% over the next 5 years, and certainly no positive increases from current levels. I do think that we’ll see another 5-10%, or more in the $1.5-3M ranges driven by some bank-owned selling. All that said, given inflation and low interest rates, I’m starting to think that opportunistic buying might make sense.

  9. Posted by eddy

    Also, I’m not a fan of the embedded document.
    [Editor’s Note: While we kind of like it, please keep in mind we provided direct links to the pdf as well.]

  10. Posted by anonm

    soon, everyone will be forced to rely on those super-expensive, impossible-to-get jumbo loans — like this one (from the same document):
    BofA: Special promotional rate of 5.875% with no points for a 30-year fixed for all Jumbo loans of $1 million+.

    That’s not high relative to historical rates, but it’s high relative to the rates needed to maintain the current ahistorical prices and price-to-rent ratios. And it’s very high for those looking to refi out of Alt-A loans into conventional amortizing, 30 year fixed rate loans.

  11. Posted by corntrollio

    But 5.875% for a 30 year fixed on $1M+ would be close to a historical low for jumbos wouldn’t it? In recent history, it looks like only from 2003 to 2005 were there a few blips lower than 5.875%, so even during the boom, the lowest rate for jumbos was about half a point less than now:
    http://www.clevelandfed.org/research/trends/2007/1107/01ecoact-1.gif
    It’s possible that further back jumbos went lower, but you’d probably have to go back to the 60s, no? (wonder how big a “jumbo loan” was in the 60s — Freddie Mac didn’t even exist until 1970, btw)

  12. Posted by anonm

    It’s possible that further back jumbos went lower, but you’d probably have to go back to the 60s, no?
    You’d want to compare against conforming mortgages, not jumbo mortgages, because a lot of today’s “jumbo” properties would have been conforming at the prices of 10 years ago. It also makes no sense to compare an advertised special (i.e., a rate that is picked from the bottom of the distribution) against the average mortgage rate (which is what is being plotted in the historical series). You’re not comparing apples-to-apples there. (For comparison, bankrate.com gives the average rate for a $1 million loan with 20% down and great credit as 6.1-6.2%). Finally, what actually matters for price-to-rent ratios should be the real interest rate, not the nominal interest rate, and real rates are not so low right now by historical standards because inflationary expectations are quite low.
    But even without worrying about all that, the bottom line remains: while 6% is low by historical standards, it is not low enough to justify the ahistorical prices and price-to-rent ratios.

  13. Posted by corntrollio

    anonm — never disagreed on your overall premise — just pointing out that 5.875% is pretty damn low for a 1M+ jumbo. Agree that the BofA number is a cherrypicked number as you said.
    Btw, I don’t think you’re necessarily right about today’s jumbo properties re: 10 years ago, even though I wasn’t speaking generally about jumbo properties because of the confounding “conforming jumbo” issue. The jumbo limit in 1999 was $240K:
    http://library.hsh.com/?row_id=141
    And the median home price in the Bay Area (includes other counties besides SF, obviously) was $292K in 1997 and certainly higher in 1999 (just look at the chart, not the math in the chart — the math is off because it doesn’t include compounding:
    http://www.burbed.com/2006/05/26/reversion-to-mean-for-bay-area-house-prices/

  14. Posted by anonm

    The jumbo limit in 1999 was $240K
    Fair enough – didn’t realize the limit had gone up so much.

  15. Posted by SFBuyer

    This is stressing me out. I’m a buyer in the 700-900k range and already can’t find a place I like that I can afford. If this loan thing happens, we’re going to get knocked back into the 600-800k range and I really doubt prices will go that much lower, sigh.

  16. Posted by Trip

    I really doubt prices will go that much lower, sigh.
    Chin up, SFBuyer, and patience! A primary support for prices in SF at about $800k and below is the easy $729k money available because of higher conforming loan limits set (for now) to expire at the end of the year. Lower that limit and you immediately knock a big percentage of buyers out of the market — i.e. prices will drop accordingly due to the lower demand. A sure fire way to take a big equity hit is to buy a place now right at the tip of the inflated loan limit. It sounds like you may need the higher conforming loan limit to buy at current prices, in which case that is the last thing you’d want to do! But if you have the cash to put enough down so that the conforming loan drop would not affect you, you’ll have your pick of places once the limit declines. Buyers at the higher-end, where govt market manipulations are less effective, are already seeing this.

  17. Posted by anonn

    Under this administration and Congress, the 729.5 superconforming limit is more likely to become permanent policy than it is to go away forever. As of mid October 2009, the FHA lending process is full of kinks, and lawmakers know it. The bouyancy is probably only half as effective as it could be at this point. Most poeple would hazhard a guess in that direction, rather than the limb Trip goes out on.

Add a Comment

Your email address will not be published.

Recent Articles