FHA to Drop Upper Mortgage Limits Jan. 1

On January 1, the FHA is reducing the size of loan that it will insure for its 3.5% down mortgage program in "high cost" areas like ours (FHA to Drop Upper Mortgage Limits Jan. 1).  The new limit will  be the previous limit of $625,500, which had been temporarily boosted to $729,750 in an effort to stimulate home buying.

Translation: With 3.5% down, a homebuyer will be able to purchase a home valued at up to $648,186 instead of $756,217.  Right now in the Beach Cities + El Segundo + Torrance, that reduces the number of affordable single family homes and townhomes homes on the market from 96 to 60.  Excluding Torrance, it reduces the number of affordable homes on the market from 35 to just 14!!!

-David

Guest Post: Pre-approval v. Pre-qualification - - Important Differences

Thanks to Rod Kuhns of Wells Fargo Private Mortgage Banking for this informative Guest Post:

Where a person sits is often where they are staked in many areas of their lives. An underlying aspect an informed buyer focusing to improve their housing is financial ability. Experience buyers know qualified real estate professionals make home buying experience more rewarding and reduce uncertainty. Quality of life and improved housing are even closer today, when buyers choose to consult with their realtor team and plan ahead.

A useful element seasoned realtor’s use to assist presenting qualified offers is the distinction between pre-approvals and pre-qualification finance approvals. The difference between the two methods has important implications. Pre-approvals let the buyer purchase the house on agreed terms versus possibly qualify for a home that could potentially own them! Informed buyers also find quality properties do not stay on the market and require planning and preparation to insure desirable results. Pre-approvals help buyers and their realtor improve on purchase offers with a purposeful buyer 'calling card'.

Pre-approvals essentially allow savvy buyers to organize in advance for a pending home that can close more quickly and counters competing interests. Additionally, sellers are known to accept pre-approved offers over pre-qualified buyers, as keeping properties off the market for 30-60 days is costly. Pre-approvals have shown increased advantages recently in all cash environments, where a purchase price can be flexibly addressed with a seasoned realtor’s negotiating ability.

A follow up and added approach using pre-approvals is to map out beforehand the level of financial comfort needed in a prospective home purchase. Often, maximum finance availability is not necessarily preferred or always required. A capable loan professional will be accommodating and work with both the realtor and home buyer to help them present their financials specific to an intended purchase and avoid over disclosing the buyer's position. Property sellers have also shown to respond well to clear offers, which use specific pre-approvals and limit sale contingencies to more generally accepted process milestones.

C.R. KUHNS - ‘Rod’
Private Mortgage Banker

Wells Fargo Home Mortgage |  2141 Rosecrans Avenue, Suite #4100  | El Segundo, CA  90245 | MAC E2856-042

Tel: (310) 266-5626 | Office: (310) 426-3938 |   Secured E-Fax:

877-402-3391 | email: rod.kuhns@wellsfargo.com

Web site address: www.wfhm.com/christopher-kuhns

Meltdown Post Mortem Ad Nauseum

The Fed continues to be grilled over whether it caused the mortgage meltdown via low interest rates, or allowed it via lax bank supervision.  Here's the latest:  Fed Transcripts Stoke Debate on Rates - NYTimes.com. 

So what's the answer?  They allowed it via lax bank supervision.  Those insisting the Fed caused the mortgage meltdown via encouraging low short-term interest rates don't understand (or don't want the public to understand) basic macroeconomics, and like to imply that the Fed has more influence on mortgage rates than it does.

Jumbo Money Becoming Available?

Jumbo loans went the way of stated income/stated assets loans in recent years.  But they will come back, because there is a huge market for them, at least on a regional basis (e.g., the South Bay).  Jumbo rates are coming down of late, to the extent that they are available.  The tradeoff is that down payment reuirements are quite high. 

And NO, there are not meaningful jumbo stated income loans out there yet unless you're willing to put down 40-50%!  For more info: Jumbo mortgages now more affordable Amy Hoak's Home Economics - MarketWatch

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Untruth of the Day: Treasury Official Says Housing Goals Not to Blame for Fannie, Freddie Failures - WSJ

An Asst. Treasury Secty has proclaimed to the Mortgage Bankers Association that Fannie Mae and Freddy Mac didn't fail because the government mandated they relax lending standards in order to meet affordable housing goals. Nope, they failed because Fannie and Freddie relaxed lending standards in order to generate more loans and make more money!

Treasury Official Says Housing Goals Not to Blame for Fannie, Freddie Failures - WSJ

Methinks the Asst. Treas. Secty doth protest too much. Fannie, Freddy, and lenders in general

Finding a Lender - The Wall Street Journal Online

Here's an interesting tool for Finding a Lender - The Wall Street Journal Online. Enter your zip code and you'll find out who's lending in your area - - and how much!  -David

The Fed's Balance Sheet as it Withdraws from Mortgage Purchases

Ever wonder what's on the balance sheet of the Federal Reserve?  Its assets can be grasped easily by referring to this graphical and interactive chart of the Federal Reserve's assets. 

Throughout 2006 and 2007, the Fed held primarily US Treasury Securities (about $780 billion worth). 

That changed dramatically with the bailouts of 2008 ($1.725 trillion), and with enormous purchases of mortgage securities in 2009 (creating a market of over $1 trillion for FHA insured home loans, which remain the key source of home mortgage lending today). - David

Cutting through the red tape of home short sales - MarketWatch

More about short sales, some hopeful.

Cutting through the red tape of home short sales - MarketWatch

If lenders get serious about allowing these and processing them within a reasonable time (there are reasons why they don't want to do so; see my earlier posts on the subject), this is another opportunity to stabilize the real estate market, get homeowners out from their underwater mortgages, and avert foreclosures. That's a good thing, and banks who comprehend it will be making a tough situation better on themselves and the market. - David

Mortgage-Index Quirks Prove Costly - WSJ.com

When getting an adjustable rate mortgage, it MATTERS what index governs your rate adjustments.  This varies from lender to lender, so worth asking.  A good mortgage broker or lender will tell you before it's time to sign on the dotted line. - David

Mortgage-Index Quirks Prove Costly - WSJ.com

FHA Sets Tighter Lending Requirements - WSJ.com

FHA tightening terms on lending.  Not all bad, we need them to originate creditworthy loans. - David

FHA Sets Tighter Lending Requirements - WSJ.com

Clearer mortgage documents make shopping easier - MarketWatch

The new good faith estimate rules, now in effect, require lenders and escrow companies to do a more precise job of estimating closing costs. 

Clearer mortgage documents make shopping easier - MarketWatch

The problem is,

FHA Aims to Tighten Credit Without Hurting Economy - WSJ.com

David Stevens, the first FHA chief in decades to have private sector experience, is making adjustments to FHA lending programs. 

FHA Aims to Tighten Credit Without Hurting Economy - WSJ.com

Here's a guy whose own home has gone down in value, and he understands why! Moreover, he anticipates the FHA to be profitable in future years due to more cautious lending practices. - David

Week-to-week mortgage applications rise 14.3%: MBA - MarketWatch

Rates on fixed rate mortgages slightly DOWN, rates on adjustable rate mortgages slightly UP, number of mortgage applications UP, but about 70% of those are refinances (good time to be looking at that). - David

Week-to-week mortgage applications rise 14.3%: MBA - MarketWatch

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2010 FHA Loan Limits Released

FHA home loans are federal assistance mortgages made by lenders, and backed by the government. The FHA doesn't make loans to homeowners -- it insures loans made to homeowners by federally-qualified lenders.
By all accounts, FHA home loans are surging in popularity.

• 2006, FHA insured 3.3% of all mortgages made
• Q2 2009, FHA insured 19.2% of all mortgages made

Re-defaults declining. Maybe we're starting to get it right?? - WSJ

Re-defauls on modified loans have been enormous, but are seeing some improvement. - David

http://online.wsj.com/article/SB126144913572001111.html

Down Payment Requirements Just Starting to Ease

Down payment requirements easing?  Hard to believe, but bound to happen as banks are pressured (or just make a business decision) to free up credit and make more loans. MGIC taking the lead per this WSJ article. - David

http://online.wsj.com/article/SB126118008009797749.html

FHA will tighten up in 2010. Is this really the right time????

Time to TIGHTEN lending criteria???? That's what's planned by the federal government on crucial FHA loans. - David

FHA will tighten up in 2010 - Inman News

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