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Wednesday, June 18, 2008

Increased FHA, Fannie Mae, Freddie Mac Loan Limits...NOT For Everyone

I posted this article March 10, 2008, on THe MortgageCorner.org. Several months have passed and I felt it important to republish it here. It WAS a FIX that was NOT a FIX.

Raising loan limits for FHA, FANNIE MAE and FREDDIE MAC has been hyped for the past few months. We all have anxiously been awaiting the results. The talk of the industry was that limits would be increased to an unprecedented $729,750 and would offer refinance solutions and new purchase possibilities to tens of thousands around the country.

The loan limits that have been in place were $271,050 for FHA and $417,000 for Fannie/Freddie, certainly inadequate for much of the housing market. An increase to $729,750 (believed to have been for all three agencies) would have certainly helped to alleviate the delinquency and foreclosure rate not to mention spurring the real estate market in general.

So the wait began. Realtors were telling their clients to wait for the ability to get a jumbo loan (over $417K) at conforming rates. Other buyers, such as first time homebuyers, limited credit individuals or people with lower then conforming credit scores also waited to buy affordable interest rate loans through FHA. All in anticipation of the $729,750 loan limit.

Even though this is a temporary increase expiring on December 31, 2008, a lot of good can be accomplished in that period of time. I was optimistic that with all the positive results that would have occurred, they would extend these increases into 2009 thereby stabilizing the market even more.

The news is out. FHA has completed its study of “high cost” counties in the country. They have announced the “new” loan limits which also will be used by Fannie and Freddie. The information is now available and you can see what the loan limits are for your area by going to this link: FHA LOAN LIMITS.

Here is a summary of what is on the very first page/list of areas:
  • (For the entire list scroll to the bottom and press "send").
    The list will default to FHA limits. You can change that to
    Fannie/Freddie limits by clicking on the drop down box. For your county,
    just type in the counry name.


    ___________________________________________________

  • FHA TOTALS

34 counties at $271,050
2 counties at $729,750
1 county at $273,750
7 counties between $273,751 and $729,749


44 Total Counties/MSA Areas


________________________________________________

  • FANNIE MAE/FREDDIE MAC TOTALS

39 counties remain
at $417,000
2 counties
at $729,750
2 counties at $625,000
1 county at $425,000

44 Total Counties/MSA Areas

_________________________________________


To my surprise – and maybe yours to – as you look up your area, the majority of counties in America have not changed for conforming. FHA did increase their overall limits but not enough to materially benefit most Americans or offer a viable solution to our current crisis.

Here is an example of new loan limits where I live, the Greater Tampa Bay, Florida area. Our 2 counties, Hillsborough (Tampa) and Pinellas (St. Petersburg/Clearwater) have changed some. FHA limits increased to $292,500 but no change for conforming Fannie/Freddie which remains at $417,000. Needless to say, homeowners who need loans over $292,500 and need FHA qualifying guidelines cannot purchase or refinance. Those who can qualify for a conforming loan with a loan amount over $417,000 cannot take advantage of lower, conforming rates. Ironic however, if you live in one of the two areas in the list above you can get either a FHA or conforming loan in the amount of $729,750.

The $729,500 limit is only available in a handful of communities around the country such as Metro New York City and New Jersey, The Metro Washington, D.C. area (D.C., MD., VA., W.V. - W.V?) and parts of California.

But there is good news for those in Guam, Alaska, Hawaii and The U.S. Virgin Islands. Your new loan limits are: $1,094,625.00 for FHA and $1,094,625.00 for Fannie/Freddie. I never realized that Guam and The Virgin Islands had such an impact on our housing crisis.
  • Moral: If you can afford a million dollar mortgage and want conforming rates or need the FHA more liberal guidelines and rates, move to Guam.

All the hype fizzled as far as I am concerned. Basically, we are being told, if you are earning a good living and can afford a more expensive home, you should pay higher interest. If you are earning a good living and already live in a larger home but need conforming rates you can afford to avoid foreclosure, you cannot live there anymore. Your house should be added to that long list of the anticipated 1.8 million foreclosures this year. No help in sight for you. Keep struggling to pay those higher rates if you can and if you cannot, well, you lose and your good credit goes too. Now you can be totally down and out.

Rep. Frank Dodd is proposing to spend $20 millions of your tax dollars to buy foreclosed homes and turn them into subsidized or low income housing. I wonder if he would consider letting the former owner of the house, now in need of subsidized housing, live in their house after foreclosure. Hmmm???

FHA calculates limits based on median home prices in each area. I don’t understand why you should be able to get a higher loan amount in one area versus another. If you can afford the $729,750 in D.C or Virginia you can certainly afford it in Tampa. If you need it to qualify in D.C. why would you not need it to qualify in Tampa? People of Tampa (or Anyplace, U.S.A) should have the same benefits as those in D.C. and more specifically in Guam or The Virgin Islands. (I wonder if they still like mortgage brokers there). A very biased system to say the least.

The amount of tax payer paid dollars spent by our government to come up with this solution would have been better spent on direct relief to the needy. Remember Hurricane Katrina? The system continues to be broken and the crisis will continue to worsen.

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