There’s always something to howl about.

Tag: Loan Limits (page 1 of 1)

The Sky is Falling… and So Are Loan Limits

There are more changes coming to the residential lending world (all those surprised by that, please stand on your head and whistle).  The Fed is maintaining the conforming loan limit of $417,000, but is lowering the non-conforming, conforming loan limits.  The what now?  A little background might help: in 2008 Fannie Mae’s charter was expanded to allow loan amounts in high cost areas (such as San Diego… yeah us!) to exceed the nationwide conforming loan limit of $417,000.  The most recent loan limit in San Diego County has been $697,500, thus making it exceedingly difficult for those of us who toil away in the real estate salt mines of America’s Finest City to keep beautiful San Diegans housed in the luxury to which they have become accustomed…

But as of October 1, the limit is dropping; in San Diego County it will be $546,250 and some wonder if this isn’t just a stepping stone on the way down to the original $417,000! 

As you might imagine, there is a long list of people who do not like this decision.  The National Association of Realtors has sent out an Emergency “Call for Action” message in response, suggesting “… a housing recovery depends on keeping mortgages affordable” and warning this decrease in loan limits will “make creditworthy borrowers unable to access affordable financing” (emphasis mine).  This raises an interesting question:

Should the government be providing affordable financing in high cost areas?

Hold on, let me ask that again, with a little more accuracy:

Should you and I be subsidizing mortgages for people buying $800,000 homes?

Wait… don’t answer that.  We don’t want to be insensitive to the needs of my fellow San Diegans and we certainly don’t want to interfere with the ongoing success of the “housing recovery.”   Let’s move on to the good news:

With the Fed in charge of “high cost” loans and a market unsure what the Fed might  do next… well, they were kind of the elephant in the room; there was no space for anyone else, which meant that until very recently, there were no true Jumbo loans to be found.  (Unlike jumbo shrimp, a jumbo loan actually means what it sets out to mean: a loan amount larger than Fannie Mae’s conforming – or in this case non-conforming, Read more

Federal Bailouts, World Crisis… What About Little Ol’ Me?

Lots of talking heads.  Lots of outrage.  Even a little fear.  Keeping up with economic developments lately is taxing and I mean taxing in its most negative “IRS and April 15th” connotation.  Last night Brian Brady and I were interviewing Matt Padilla for Bloodhound Radio.  It was a great discussion and got me to thinking about what is (or rather should be) important.  I mean, the whole thing can be overwhelming: how did we get here, who’s to blame, what are the macro ramifications of this massive federal bail-out… makes one feel small and even a little lonely in the midst of this big economic world gone ’round the bend.

So I stopped on the way home for a big shot of wheat grass (substitute whatever manly libation you prefer here), calmed down and eventually found myself a little less interested in what it all means and a little more interested in what it all means to the real estate agent on the street.  In other words: What is the next step?

Last week I suggested that Wall Street’s Meltdown may actually help the housing industry.  Consumer debt will dry up in the credit crunch and this bail-out will not have much impact in that arena.  The financial industry is going to come out limping and take some time to lick its wounds.  Consumer debt has always been a risk and will end up on the back burner for a while, but the need for profits is always there; where will it come from?  Where is the supply of money going to be greatest?  Thanks to Uncle Sam it is going to be mortgage money that flows freely.  But flowing freely is not the same as distributed evenly and this is where the real potential lies for homeowners as well as real estate agents.

By the end of the year conforming loan limits are going to drop.  Here in San Diego they should end up around $625,000.  Under that limit there is going to be a large supply of federally backed (and encouraged) cheap money.  Over that limit, however, it is going to be Read more