About Government Refinance and Home Purchase Programs

Another interesting article came out recently over at CNNMoney.com. It highlights comments from officials at the Fed. Here are some highlights:

NEW YORK (CNNMoney.com) — Two Federal Reserve officials said Friday that the housing market could damage the economy even more severely than it has already if measures are not taken to correct it.

In speeches at the U.S. Monetary Policy Forum in New York, Eric Rosengren, president of the Federal Reserve Bank of Boston, and Frederic Mishkin, a member of the Federal Reserve board of governors, spoke about the critical nature of the housing market crisis.

“Further declines in housing prices could depress residential investment, reduce consumer spending, generate elevated foreclosures, and contribute to financial instability,” said Rosengren.

“Taking appropriate monetary, regulatory, and fiscal actions to mitigate this risk seems prudent.”

As mortgage rates continue to decline, he said that foreclosures and unemployment should come down with them. He also said that as borrowers shy away from risky subprime loans, they should instead look into FHA loans – home mortgages that allows for a purchase or refinance with a low down payment.

“Examining how FHA programs could continue to be modernized and streamlined and become a more viable choice for borrowers may be an important mitigant for housing problems,” said Rosengren

A very interesting article came out recently over at CQ Politics. Here are some highlights:

Federal Reserve Chairman Ben S. Bernanke said Wednesday that the central bank remains concerned about slowing economic growth, and he again called on lawmakers to clear housing legislation that could help struggling borrowers.

The collapse of the subprime mortgage market has helped drive a wider credit crunch, and the Fed has become increasingly concerned about the risks of a recession.

Since September, the Fed has cut its benchmark federal funds rate from 5.25 percent to 3 percent, and Bernanke suggested to the House Financial Services Committee that the central bank is open to further rate cuts.

A recent report from the AP said this:

LOS ANGELES – The number of homes facing foreclosure jumped 57 percent in January compared to a year ago, with lenders increasingly forced to take possession of homes they couldn’t unload at auctions, a mortgage research firm said Monday.

Nationwide, some 233,001 homes received at least one notice from lenders last month related to overdue payments, compared with 148,425 a year earlier, according to Irvine, Calif.-based RealtyTrac Inc. Nearly half of the total involved first-time default notices.

The worsening situation came despite ongoing efforts by lenders to help borrowers manage their payments by modifying loan terms, working out long-term repayment plans and other actions

The new FHA loan limits are designed to help stem some of that tide.

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.

Learn more about current FHA programs by contacting us.

According to the Washington Post the Office of Thrift Supervision is trying to come up with a plan to help people avoid foreclosures when they are upside down (owe more than the property is worth) on their home. It involves getting an FHA for part of the value and some sort of certificate for the rest. I frankly don’t really understand it but here is the article on the subject if you are interested.

A new report over at MarketWatch.com indicates that only a handful of US counties will see the higher end of the new loan limits stipulated in the recently passed economic stimulus package. Thankfully, most counties don’t need to reach the high end to help people. Here is an excerpt:

ORLANDO, Fla. (MarketWatch) — Only 15 counties in the U.S. have a median house price high enough to qualify for the temporary increase in the maximum loan limits called for in the economic stimulus package, an indication that the big jump may not help as many home buyers and refinancers as originally expected.

The National Association of Home Builders had hoped that as many as 29 metropolitan areas would qualify for the new $729,725 ceiling. But according to a staff member at the group’s convention in Orlando last week, it now appears that less than 10 will make it.

The NAHB has been saying that more than 3 million additional owner-occupied houses will be eligible for what are now being called “jumbo conforming” loans that can be purchased by Fannie Mae and Freddie Mac, the two government-sponsored enterprises charged with brining liquidity to the mortgage market.

Fill in the form on the right to find out more about current loan limits.

We get this quote from a recent article over at consumeraffairs.com:

NAR President Richard Gaylord said he is encouraged with plans to increase conventional loan limits.

“Higher limits for FHA loans, which go into effect March 14, will be a big help to first-time buyers in high-cost markets. Higher limits for conventional loans purchased by Freddie Mac and Fannie Mae will take a bit longer – when they become available, high-income, creditworthy borrowers in high-cost areas will have access to affordable and safer financing, and that will help unleash pent-up demand,” he said.

Looks like banks are sick of foreclosing on people too. Credit Suisse is making a request to the federal government to loosen the standards on qualifying for a government-backed FHA loan. Right now it is very difficult to get an FHA loan if a borrower has fallen behind on mortgage payments in the last 12 months. That is leading to a lot of foreclosures. If the FHA loosens standards and allows people who are falling behind to refinance the theory is that fewer foreclosures would occur. (Of course the risks taken by the FHA program would greatly increase). Here is an recent Reuters article on the subject and here is the WSJ take on it.

The long awaited day has arrived. The economic stimulus package was signed today. Among other things, it raises the loan limits on FHA loans as high as $729,000 in high cost areas. See the breaking news here.

We get this from a recent CNNMoney.com article:

NEW YORK (CNNMoney.com) — President Bush said Monday he is pleased with the $170 billion economic stimulus package passed by Congress last week. The White House announced that he plans to sign it Wednesday

Once that bill becomes law the FHA loan limits will officially be increased. After that it is unclear how long it will take to sort out the details with banks and to nail down the new county by county loan limits.

While the president is likely to sign the stimulus package into law this week, it is still not clear how long it will take before loan limits actually increase. This article in BusinessWeek suggests that at least some of the new limits (likely on the conventional conforming loan limits, not the FHA loan limits) won’t be in place until the summer of 08! Let’s hope it is much, much sooner for the FHA loans.

There was a good article in the San Jose Mercury News about the timing of the FHA Reform aspects of the soon-to-be-signed economic stimulus bill. Here is an excerpt:

[I]t could be weeks before consumers will be able to benefit from the mortgage provisions contained in the legislation approved this week.

The bill approved Thursday, which President Bush is expected to sign next week, includes measures that could result in lower mortgage rates for many Bay Area homeowners who are eligible to refinance. And those purchasing homes in this expensive area potentially will qualify for lower rates than they would have received in recent years.

But the logistics of enacting the bill’s changes, and the extent of the savings borrowers can expect, are unknown.

Contact one of our counselors to get the latest info on FHA guidelines.