JUST ANNOUNCED: NEW CONFORMING LOAN LIMITS FOR 2012

For most of 2012 we have operated with temporarily increased conforming loan
limits, $580,000 here is Sacramento. As we near the end of the year, the question we’ve all asked is what will the 2009 limits be?

Yesterday, the announcement came. On January 1, 2011, most of the country will return to the 2007/2010 limit of $417,000. However for High Cost areas of the country, the new maximum loan amount will be

“calculated as 1.15 times the median house price for the highest priced county in the property’s metropolitan or micropolitan area or the median house price for the property’s county if it is in a rural county. “

In Sacramento that translates to $474,950 for a single family home, higher for 2-4 units of course. If you’re not in Sacramento and wish to check your area, click here for the list of High Cost areas and their loan limits.

DENVER MORTGAGE RATES CONTINUE TO FALL

Denver mortgage rates continue their descent, briefly reaching 4.75% last week for a 30 year fixed rate.  This is certainly the time to lock in a delicious long term rate!

You will pay one “point” (an amount equal to one percent of the loan amount) to keep your rate under 5% now, but this is a better bargain that it’s ever been.  Normally, for each point paid, your rate will drop about one quarter of one percent.  In this market, that point will get you under 5%; the “no points” rate will be in the 5.5% to 5.75? range.

Also, just know that banks are charging higher rates for everything from lower credit scores to “cash out” refinances, so these low rates are available only to the top tier borrower who just wants to replace her existing loan with a 30 year fixed rate.

Call me for help on your refinance!

VA 100% FINANCING: NEW 2009 VA LOAN LIMITS

The new 2009 VA loan limits have been announced. Here is a link to those new limits by County.  Although somewhat lower than the temporary 2008 limits, they still offer much needed help in high costs areas.

VA Maximum Loan Limits

People sometimes ask if VA does Jumbo Loans.  Ummm…sort of.   As I wrote in a previous post, VA technically has no maximum loan limit.  What it does have is a maximum amount that it will guarantee; generally 25% of $417k.  However, in the high costs counties, that amount may be higher.

If you wish to buy a home beyond those limits, you must effectively make up the VA guarantee difference with a down payment.  For more explanation on that, read my previous post above or this one, or click this link to calculate that down payment for the home you are considering.

And give me a call when it’s time to get ready.  I can get you pre approved with either VA or CalVet if you are buying in California!

FHA SECURE BITES (THE DUST)

Not that it ever proved itself viable to begin with, requiring as it did the voluntary participation of the troubled homeowner’s current lender, but HUD just announced that FHASecure is finished as of December 31st.  Kaput.

FHA stills does (and did long before FHASecure was announced in Sept of ‘07) 100%+ combined loan to value (CLTV) refinances, assuming of course that you can convince your current lender to assume that 100%+ risk by subordinating the balance of any current financing to the new FHA 1st loan.   That’s proven to be a grandiose assumption.

The main difference between the two programs is that while FHASecure required that you be in default, regular 100%+ FHA refinances require that you not be in default.   Go figure.  If that all sounds really stupid, like maybe the right hand didn’t know that the left hand had already spilled the beer, then I’m not alone.  To make FHASecure an even bigger joke, banks now imposed minimum Fico scores of 580 to 620 for all FHA loans, something impossible to maintain when you have defaulted on your mortgage.

Anyway, we can at least strike FHASecure from the list of pseudo solutions to the foreclosure mess.  The sooner we blow out all the legislative smoke, the sooner we can find and try to rekindle the spark of stability in housing.

I know I sound grumpy , but Merry Christmas anyway!

HOMEOWNER AFFORDABILITY AND STABILITY PLAN: PART I

There are two parts to the plan announced last week to help troubled homeowners. To clarify what we know so far, I’m going to focus on Part I:  the “Affordability” part of the plan.  This section addresses homeowners who can still afford their mortgages but who have been unable to refinance to lower rates because of falling home values.

Full eligibility details will be announced by the Obama administration on March 4, but we do know a few things now:

Does this apply to all loans?   No, only to loans owned or securitized by Fannie Mae or Freddie Mac (after March 4, you can call your lender and ask if this is true in your case)
 Does this apply to rental property loans and 2nd homes?  No, it only applies to primary residences
What if I owe more than my home is worth?   This is one of the plan limitations for Californians.  Under the plan, you will still be allowed to refinance, but only if you owe a little more than the home is worth.  Specificially, your loan cannot exceed 105% of the home’s current value
Will my payments go down? Not necessarily.  You’ll merely have access to current market rates without any special pricing or government subsidy.  Furthermore, if you have an interest-only loan now, your payment could actually increase if you refinance into a normally amortizing 30 yr fixed rate loan
Will mortgage insurance be required?   We’ll have to wait until March 4th to find out.  Since first mortgages that exceed 80% of a home’s values are typically required to have mortgage insurance, this would be a reasonable assumption.  However, since it offsets the benefit of lower rates for those who previously did not have to have it, maybe the plan will address this another way
Will my principal balance be reduced?   No, the primary benefit to homeowners is to provide access to today’s lower rates for those whose declining home values might prevent refinancing.  It is not the intent of this section of the plan to reduce the amount owed.
That’s my summary of Part I.  Stay tuned for an analysis of Part II:  the “Stability” piece…

HUD SAYS YES TO USING $8K TAX CREDIT FOR CLOSING COSTS

In a sort of reversal of its former reversal, HUD announced that it would allow FHA approved lenders to monetize the tax credit to allow first time buyers to “apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.”

This is a modification of the original announcement that stated the credit could be used to meet the 3.5% FHA down payment requirement. In its new form, it may help some people.  A buyer could certainly take advantage of that to write an offer that didn‘t ask the seller for help with closing costs.  Since this type of concession is common practice in our market where most buyers are strapped for cash, not asking the seller to put out extra money might set the buyer apart from the crowd.  Or the funds could be used in addition to any seller credit to buy the interest rate down further making monthly payments more affordable.

However, remember that it takes everybody a little while to figure out how to implement these new rules, and in this case, figuring out the details could be a little complicated.

HOME AFFORDABLE REFINANCE & FANNIE MAE’S “REFI PLUS”

Fannie Mae has clarified its implementation of the Obama Administration Making Home Affordable Plan announced on March 4, 2009.   The refinance pice of the Obama plan–Home Affordable Refinance–is for borrowers with an acceptable payment history who have been unable to refinance to lower rates or a more stable loan due to declines in property values.

It  will be called “Refi Plus” by Fannie Mae.  Here is a Q&A for consumers about “Refi Plus“, and here is the link to look up your current loan to see if you qualify.

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FIRST TIME HOME BUYER TAX CREDIT FAQ

With the First Time Home Buyer Tax Credit that was first passed last Fall, and the recent House and Senate versions that modified that further, some people are still confused about the details.  How much is the credit, when does the home have to be purchased, and can the tax credit still be taken for the 2008 tax year?

Here’s a good site where you can find quick answer to most questions.

Your Credit Scores: Short Sale vs. Foreclosure

As consumers are swept into the foreclosure vortex, questions arise about whether to attempt a short sale or let the home go to foreclosure.  Which will damage credit less and allow the homeowner to more quickly reenter the market?

Many real estate professionals have promoted the idea that a short sale will be less damaging, and some have gone so far as to predict the number of points your score will drop on a short short vs. the point drop on a foreclosure.  This is like predicting how hot it will be on July 4th.  As I have disagreed in several posts including Short Sales vs. Foreclosures, Your Credit Will Suck Either Way,  one may be no better than another.

Here is an update from Old Republic Credit Services:

Recently, several alternatives to foreclosures have become popular. Some of these include “short sales” and “deed-in-lieu of foreclosure”. It is important to know that as far as the FICO score is concerned, there is no difference between foreclosures and these other options. Each is considered and an account that was “not paid as agreed” will have the same negative impact on the score. However, the account status reported is ultimately the decision of the creditor.

Lenders may state that the minimum time frame for securing a new loan is less for a short sale than for a foreclosure, but keep in mind that these are just the minimum time frames.  After that is satisfied, you’ll still need to have good credit scores in order to get a new loan.

CALIFORNIA LEGISLATURE PASSES 90 DAY FORECLOSURE MORITORIUM

The California State legislature recently approved a 90 day moratorium on foreclosures.  Exempted are banks with loan modification programs.  Although opponents vehemently denounced the new law as merely delaying the inevitable, the exemption could apply needed pressure on the banks to more actively modify loans.  Other critics argue that there are too many loopholes and that  having a loan modification program and actually doing loan modifications  are two different things.  Here are some details.  Here’s the SF Chronicle article.