Having expired at the end of September following a three year run, and having effectively been out of reach since August, it would appear that the $729,750 loan limit for FHA loans in high cost areas, such as San Francisco, will be resuscitated.
From the Wall Street Journal today:
…late Monday a bipartisan Congressional committee announced an agreement to increase FHA’s maximum mortgage limits to $729,750 from $625,500 through Dec. 31, 2013. The bill is linked to a continuing resolution to fund Congress past Saturday, increasing the likelihood that this backroom deal will become law. The House is scheduled to vote on the bill today without debating these changes…
As we wrote when the “super conforming” limits first expired: “While we don’t expect the change to have a radical impact on the market, we do expect to see an impact on liquidity and values in the $650,000 to million dollar segment due to potentially higher down payment requirements and rates.” And now, vice versa.
∙ The Housing Lobby Strikes Again [Wall Street Journal]
∙ Loan Limits Set To Fall From $729,750 To $625,000 In San Francisco [SocketSite]
∙ Conforming Loan Limit Extension Gains Obama’s Support [SocketSite]
Once again another example of Milton Friedman’s axiom, “Nothing is so permanent as a temporary government program.”
so dumb….
The economy has absorbed the limits and digested them very quickly. Now they’re very hard to get rid of.
A bit like Creme Brulee: 20 seconds in the mouth, 20 years on the hips.
And of course, it’s crickets from a certain sector who gloated doomsday scenarios on here …
Looks like the NAR lobby won out, but at least the Fannie and Freddie limits appear to be staying put. The latter at least is a big win for common sense.
Rillion and lol are right. Once you subsidize people, it’s very difficult to stop.
@[anon.ed], don’t worry, they’ve still got the excessive interest rate increase gods to pray to.
I don’t recall anyone “gloating doomsday scenarios” over this. Does that phrase even work grammatically?
I did make the statement that local prices would fall if these limits were lowered. Guess we’ll never see if I would have been right or not.
But what better focus for an entity as flush and grossly overcapitalized as FHA? How could anything go wrong making large loans to people with spotty credit, modest income, and no money down? They should have thought of this sooner…
I don’t recall anyone “gloating doomsday scenarios” over this.
Do you not? huh. I do.
Does that phrase even work grammatically?
Sure.
“How could anything go wrong making large loans to people with spotty credit, modest income, and no money down? ”
They recently revealed that they have a 36% recovery rate on loans that go bad!
“Buried deep within the FHA’s filings yesterday was the disclosure that when home loans go sour, the agency’s guarantees cost it 63.7 percent of unpaid principal. Homes get foreclosed; banks sell them at a huge loss, and the FHA must make good on mortgage obligations that vastly exceed market valuations. ”
http://www.bloomberg.com/news/2011-11-16/fha-can-t-defy-housing-market-s-warnings-the-ticker.html
Anon.ed, I recall it was you who said SF buyers had mostly stopped using FHA in the past year because of all the fees and costs they tack on.
My understanding is that if you have a reasonable credit score and at least 10% down, there were other sources of money that were less expensive. And if you don’t have those things, FHA isn’t going to be particularly cheap. And there is also a threshold 10% down required by FHA for people with the lower tier credit score. So i’m not sure how many SF buyers this is going to affect, but probably not many. Fannie and Freddie would have been a much bigger deal.
“I recall it was you who said SF buyers had mostly stopped using FHA in the past year because of all the fees and costs they tack on.”
No, that’s nothing someone like myself, a person who actually works with people who get FHA loans, would say. Just did one last week. Maybe I talked about the lack of 729,750K lending already being in effect. That will always gets baked in by lending well before the drop dead date. Not that your recollection of things others say is worth as much as your other words. Which is to say, why did I just write as much as I did talking to you?
Just read the following paragraph in a WSJ article on budgets:
“On another front, Congress moved to end another big budget issue, with remarkably little drama, by approving legislation Thursday to keep federal agencies operating through Dec. 16.”
So, I’m assuming this is the bill mentioned in the post? So, did the loan limit extension sneak in as well? The article didn’t say…
So if this passes, those buyers who need a loan that is higher than $625k but less than $730k may be able to receive an FHA loan at an interest rate (APR) that is about .5% or .6% higher than Fannie/Freddie loans (i.e. higher than current jumbo rates) if they jump through all the FHA hoops. That ought to set the SF market on fire and stanch the declines we’re seeing.
btw, “gloat” is an intransitive verb, so “gloated doomsday scenarios” is, of course, not grammatically correct. Who cares – this is just a blog – but the question was asked.
That ought to set the SF market on fire and stanch the declines we’re seeing
Great one. Inspired.
Who cares – this is just a blog – but the question was asked.
Fine, that was indeed poor grammar by yours truly. See how that works, AT? It’s quite all right.
flujie, I’ll put the point in straight terms instead of rhetorically. Raising the limits on Fannie/Freddie loans may have helped the SF market (in terms of sales volume and price support) as they provide lower rates and easier qualifying/down requirements than jumbo lenders. Raising the limits on FHA loans is not going to have any impact because FHA interest rates are higher than conforming rates and generally even higher than jumbo rates.
Anyone care to venture a guess as to how many SF purchasers will buy a place with an FHA loan that is between 625k and 729k? One a month? Two?
I understood your opinion, and I’m sure everyone else did as well. And “flujie” hasn’t posted here in years, troll.
Anyone care to venture a guess as to how many SF purchasers will buy a place with an FHA loan that is between 625k and 729k? One a month? Two?
Try every other sale in that range, at any given time. You’re speaking about something so far out of your own knowledge base that it’s laughable. Typical, but laughable.
Really? Because back when fluj did post here, I recall his “in the trenches” commentary about how financing markets didn’t matter because everybody here is so rich; not sure where they get it, but they get it; bank of mom and dad…and so on.
Now anon.ed tells us that every other sale in that range is an FHA sale reliant on unsustainable government support. So…is our market stable, or not?
Yes, because everything is all the way one way or all the way another, right? That’s what “fluj” always said.
Hardly.
People use what’s available, and what works best for them. Your insertion of “reliant” and “unsustainable” are opinion.
“Try every other sale in that range”
D*mn, so sales volume in that range must have absolutely plummeted since 10/1 when the limits were lowered. Must be why we saw the YOY median price decline in October. Glad we now have an explanation for that.
Or, perhaps flujie is just making stuff up.
Given the way lthe bottleneck that is currently lending is working, with everybody who has a notion to refinancing because of the low rates, you wouldn’t even know until December anyway. But keep talking. There’s plenty of rope around this subject. Do with it as you will.
And in the response to Legacy Dude that should have been “insertions … are” in case the grammar police show up.
“Yes, because everything is all the way one way or all the way another, right?”
What does that even mean? Do you ever take a position on anything, or just make a hobby of criticizing the opinions of others?
Anyway, “unsustainable” is hardly my opinion. Read through the link posted by tc_sf or anything else publicly available on FHA’s financial health. This thing is a dead man walking being kept alive by endless borrowing/taxpayer cash. It is not a going concern. Ditto for Fannie and Freddie. If you ran your own business this way, you’d be out of business in under a year. Sounds pretty unsustainable to me.
Regarding “reliant”, roughly 90% of the mortgage loans in this country are either made or guaranteed by the government in one form or another. Does this not constitute reliance?
I take positions on things constantly. I find fault with trying to reduce everything into a pithy snide internet take constantly too, such as “financing markets didn’t matter because everybody here is so rich” — which was a nonsense baiting flame. So whatever, Dude.
I think that this will be more significant then a GSE limit raise. I think a decent number of people are cash poor and thus down payment constrained.
But 3.5% down payments contribute to market instability in both directions. Makes it easier to bid up prices going up and since even in a flat market they’re basically underwater after selling costs as soon as they sign the contract they don’t provide much support if prices fall.
As far as perverse incentives go note that the US price/rent I think is around 15. 3.5% down is about half a year of rent. On average people are going 20 months between non payment and losing the house. I certainly doubt that you could practically foreclose within half a year in many jurisdictions.
Last DQ showed about 1/4 of the bay area market was FHA.
Nonsense baiting flame indeed. I tried to find your epic quote saying exactly that, but wasn’t patient enough to spend more than 30 seconds in the SocketSite archives. So whatever back at you, fluj/anonn/anon.ed/anon.troll.
And if you really take positions all the time, then take one here. Do you think that FHA is run in a sustainable manner? Do you disagree that the mortgage market is reliant on government support? Enlighten us.
Find the epic quote first. (Hint, it doesn’t exist.) Then I’ll share my thoughts, which you can criticize and wax as snidely reductive as you like.
See, when I write things like, “lots of houses are bought with family money,” or “it’s not uncommon to see cash purchases,” or “more people than you think have plenty of cash to place as down payment,” and you read those things as, “everybody is so rich around here that they don’t need financial markets” ? There’s nothing I can do about that. Granted, the main point gets taken sideways during internet arguments. But at the end of the day it’s a little matter of filtering the written word through your own prism. You guys want to reduce everything. As if the world doesn’t exist in shades of grey.
Gotcha. OK, I apologize for attempting to quote you out of context. Seriously.
Now please answer my questions: in your opinion, is the mortgage market reliant on government support, and is that support sustainable in current form?
The mortgage market in the modern era has always been somewhat dependent upon government support. That’s what the secondary market is. I’m sure you know this. Is FHA expansion sustainable, as a stand-alone super-conforming high cost entity? The jury is out on that. We’re entering new territory. If you think I’m going to go out on a limb and say something is black or white here, I’m wondering, why? And why would anybody else for that matter?
Because it’s easy to criticize people who take positions or make predictions, especially in hindsight, when their comments turn out to be less than 100% correct (or would have been correct absent unprecedented government intervention that nobody predicted). It’s much more difficult to say something of substance yourself, or make a prediction and own up to it if you’re wrong.
I guess SocketSite could just be a site where name-droppers gush over empty mansions and try to figure out “where they bought that toilet” and resolve other key issues affecting mankind. But I wouldn’t bother reading it if it was.
Lastly, the only “new territory” that FHA is entering is More-Bailout-Capital-Town, which it would have eventually gone into absent this development anyway. This will just speed their trip there. One has to be financially illiterate or willfully blind to think this move makes any sense outside of the political morass.
I say substantive things constantly on here, particularly about individual properties.
Lastly, the only “new territory” that FHA is entering is More-Bailout-Capital-Town
No, it’s entering new territory as the sole game in town for that sort of loan. Look. The words you use fairly scream, “I made my mind up about all of this long ago, and you’re a dolt if you don’t think like me.” So what’s the point?
I don’t scream. But I am saying that FHA is a financial disaster. Does anyone disagree? I’m open to other viewpoints if anybody is actually on that side of this issue.
“Anon.ed, I recall it was you who said SF buyers had mostly stopped using FHA in the past year because of all the fees and costs they tack on.”
Not true, tipster. fluj/anonn said two things about FHA in one thread:
https://socketsite.com/archives/2010/02/december_caseshiller_index_up_for_bottom_tier_nominal_s.html
Far less than a 30 second search.
Right. Thanks. If you want to talk to Tipster for me from now on that would be great. 🙂