There was an interesting article with portions related to the FHA program in a California paper recently. Here are some relevant highlights:
For borrowers, FHA-insured mortgages are advantageous because the required down payment is only 3 percent and all of that can be a gift from a relative, an employer or a nonprofit group. FHA also allows multiple co-borrowers, none of whom has to live in the house being purchased or refinanced.
In addition, FHA borrowers can carry more debt and qualify with lower credit scores than private insurers typically allow.
Implementing new mortgage ceilings could take one to three months, according to James Lockhart, the director of the Office of Federal Housing Enterprise Oversight, the entity that ensures the financial soundness of those government-sponsored enterprises.
Donald W. Petty, owner of Pacific Sunrise Mortgage in Riverside, said Inland mortgage professionals initially expected Riverside and San Bernardino counties to qualify for the $729,750 maximum mortgage limit allowed nationally under the new legislation.
But, he said, if the Federal Housing Administration calculates the median home price the way the California Association of Realtors does, the new Fannie Mae and Freddie Mac ceiling will barely budge in the Inland Empire.
“We were pretty disappointed when we looked at the figures and the median prices had dropped to the point we may not see much of an increase in the conforming (Fannie Mae and Freddie Mac) loan limit,” Petty said of the Inland region’s predicament.
Lemar Wooley, spokesman for the Federal Housing Administration, said that agency “will use a combination of existing government data sets and available commercial information to determine the median sales price” and then apply a formula of 125 percent of the median price to set the new loan limits.
Wooley said in any metropolitan statistical area, FHA will use the median of the highest-priced county, which in Inland Southern California would be Riverside County.
“Obviously we are still crunching the numbers,” he said.
That hasn’t stopped home builders and others from speculating that based on the Riverside County median of $354,000 that the California Association of Realtors reported in December, the new Fannie Mae and Freddie Mac loan ceiling for Riverside and San Bernardino counties would be $442,500 — about 6 percent higher than the current limit.
Neighboring coastal counties, which have higher median prices, would get a far greater benefit. The loan ceilings would be lifted by 31 percent in San Diego County, 41 percent in Los Angeles County and 68 percent in Orange County.
