Will the Increase in Mortgage Limits Help?

As a part of the economic stimulus plan passed in February, Congress allowed for the temporary increase in mortgage limits for Fannie Mae, Freddie Mac, and FHA mortgages. However, many people have questioned how many people this will actually help. There are reports that only 15 counties across the country have median home prices high enough to qualify for the maximum mortgage limit of $729,725 – and, most of these counties are in Southern California.

While the National Association of Home Builders (NAHB) has estimated that mortgages on 3 million additional homes will be eligible for purchase by Fannie Mae and Freddie Mac others estimate that it will be half that amount. However, there will be several other counties across the country that do no necessarily qualify for the maximum limit but may still see an increase above the current $417,000 limit.

The changes to the FHA mortgage limits will have an even greater impact. All counties, regardless of median home price, will have a floor of at least $271,050 – up from $200,160. And, at least 85% of the 3,300 counties in the U.S. have median home prices high enough to result in an increase to the maximum FHA mortgage limit.

These changes may not help everyone, but they are not intended to. The reason for these increases is to increase the liquidity (availability and accessibility of money for mortgages) in the mortgage market to help repair the damage done by the sub prime mortgage mess and the slumping housing industry.

Keep checking back for the actual loan limits in your area – they should be available in the first half of March.

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Mortgage Limits Increased

As a part of the stimulus plan enacted by Congress and Signed by President Bush last month (see my blog entry on the economic stimulus program) the mortgage limits for Fannie Mae, Freddie Mac and FHA loan programs will increase for the rest of 2008.

As a result of the problems facing the housing industry and the sub prime mortgage crisis, jumbo mortgages (those greater than $417,000) have been harder to get and much more expensive. Traditionally, jumbo mortgages have used similar underwriting standards and were priced approximately .25% - .50% above conventional mortgages. Now, the underwriting standards are so tight that many people are unable to afford these types of loans. Additionally, jumbo loans have been as much as 1.5% higher than conventional mortgages making the much less affordable.

Loan limits for a single family home will increase from $417,000 to $729,750 or 125% of the median house price in the area. FHA limits will also increase. The current basic standard mortgage limits for FHA insured loans will increase from $200,160 to $271,050 (with limits up to $729,725 in the highest cost areas). Limits for 2 – 4 unit properties were also increased.

These mortgage limit increases are expected to help the beleaguered housing industry. It will make mortgages more attainable and affordable for more Americans. It will also allow more people to refinance their current mortgages to more favorable terms and rates and hopefully cut down on the mortgage defaults and foreclosures which hit record levels lately.

Check back for more information as to the actual mortgage limits you can expect for your area. As soon as I know them I will post them to this blog.

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Do I have an orphaned mortgage? What is that and should I care?

In the past a mortgage was “orphaned” when the loan officer who originated the mortgage left the company. Since the loan officer was the point of contact for the borrower for future mortgages, the loan was now orphaned. The branch manager of an orphaned mortgage would usually assign these mortgages to another loan officer who would send out a lender introducing themselves as the borrowers new point of contact.

However, truly professional loan officers have evolved these days and take a much more proactive approach to their customers’ financial situation. Professional loan officers take an advisory role to their customers and take into consideration current needs as well as future goals of their customers to make sure the mortgage product they take helps them achieve these goals.

A professional loan officer will usually offer to review their customers’ financial situation at least annually, free of charge, and make recommendations based upon their current and projected financial situation and changing financial goals and needs. These loan officers are not just trying to get another refinance when rates drop.

So, if you have a mortgage and never hear from your loan officer (except when rates drop and they want to refinance your mortgage) you have an orphaned mortgage.

If my loan officer keeps in touch with me it is only because they want more business for themselves - they really don’t care about my situation.

Unfortunately, this may be true of many loan officers. Many will mail you a postcard monthly so you have their contact information in case you need another mortgage. However, there are a lot of true professionals in the business who do really care about their customers. Yes, the loan officer will get more business by keeping in contact with you but you can benefit from his efforts as well.

Mortgages are just a commodity and I call around to get the lowest rate possible and go with that guy.

I know a lot of people who have said this and live to regret it. In fact, over the past several years there were a lot of people who made the decision to use another loan officer who I have heard from since. Many were convinced to take an exotic mortgage, such as a Pay Option ARM, that they neither fully understood or was the correct mortgage closed because the loan officer they ended up with was inexperienced. Some of them ended up with a higher rate because they did not lock in the rate when they should have. Some of them ended up paying exorbitant closing costs and fees that were never properly disclosed up front.

Remember, having the lowest rate on the wrong program is not a good deal. Getting a fair rate on the right program with a loan officer who understand and cares about your financial needs and goals is.

If I don’t hear from my loan officer, how does that cost me money?

Here are a couple ways:

Over the past 3 months there were several times when rates were at or below 5.500% for a fixed rate, 30 year mortgage depending on your credit score and LTV (See “How much will my credit score cost me on my next mortgage?” for more information on this). When this happened, all of my customers were notified and had to opportunity to lock in these rates. After rates had crept back up (these rock-bottom rates were available a very short time) the news started reporting rates at their lowest levels in years. I received several calls from people who read my blog about refinancing. Unfortunately, the rates were long gone by the time they had read about them, which is often the case.

Also, at the end of last year, Fannie Mae and Freddie Mac announced they were introducing delivery fees for mortgage with credit scores below 680 and LTVs over 70% (See “How much will my credit score cost me on my next mortgage?”). I contacted my customers that were in this situation and advised them to refinance before these changes took place. I was able to refinance several of them before the changes and saved them a lot of money – most of these customers would not have been able to save s much money on their refinances had they waited due to the increase in rates they would be subject to now.

Lastly, a customer of mine had contacted me in the fall. They had an ARM that adjusted up more than 2.5% in the spring and they had fallen behind on the payments due to the increase in payment. They had called a couple sub-prime lenders and were not going to be able to get a better rate and lower payment with them. They called me and I told them about the FHA Secure Program (See “FHA Offers Relief to Homeowners with FHA Secure” for more information on this program) and refinanced them to a lower rate and better payment. They haven’t been late on a payment since.

There are many other ways that having a loan officer you trust can save you money.

So, what do I do if I have an orphaned mortgage?

Find a professional loan officer, such as myself. I am happy to help people with their financial needs and determine what mortgage program is right for them. Even if you are not ready for a new mortgage right now, I will be happy to evaluate the loan you have in light of your needs and goals and make recommendations to you. I talk to many more people who do not need a new mortgage than I do to people that do need a new mortgage now. It is part of my job as a professional loan officer. If you have questions or about your mortgage please don’t hesitate to give me a call or send me an e-mail.

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Congress Agrees on Economic Stimulus Plan – Sends to President Bush for signature.

Last month the US House of representatives quickly came to an agreement on the size and scope of the economic stimulus package with the White House and approved the measure by an overwhelming vote of 385-35. The immediately called upon the US Senate, along with the white House, to adopt the House bill without changes.

However, the Senate Finance Committee, led by Democrat Max Baucus, D-MT, added over $40 Billion to the bill before sending it to the Senate for debate and vote. The new version of the bill, supported by both Barack Obama, D-IL, and Hillary Clinton, D-NY, would have added huge delays to the passage of the stimulus package as the House and Senate would need to agree on changes so that the bills matched. The republicans filibustered in the Senate that basically killed the bill by not letting it go to a vote.

The Senate then quickly acted to approve, by a vote of 81-16 (Obama and Clinton did not vote due to campaigning), a bill sponsored by Senator Mitch McConnell, R-KY, which was essentially the same as the House version except for the addition of some added benefits for Senior Citizens and Disabled Veterans. The house approved this bill hours later so it could be quickly sent to the President for his signature.

How much will I get?

Basically, if you make less than $75,000 ($150,000 for a married couple) you will get a check in May or June of this year. Single taxpayers will get $600 and a married couple will get $1,200. Plus, you will receive $300 per child (eligibility is the same as for a child that qualifies for the child tax credit on your tax returns) For those who make at least $3,000, but not enough to pay taxes, will receive a $300 rebate for individuals and $600 for married couples. This bill also covers up to 20 Million senior citizens living solely on Social Security and 250,000 disabled veterans.

What do I have to do to get this money?

The rebates will be based upon tax returns for 2007. So, as long as you file your tax return, you will automatically receive your rebate. You need to do nothing else. For those taxpayers who file for an extension on their tax returns, or file their tax returns late, their rebate checks will be delayed accordingly. Those who do not file a tax return will not receive their rebate checks.

Will this help the economy grow?

This is the big question. Many people feel that most of this money will go to savings or paying down debts. If this is the case, it will have a limited effect on economic growth. When we pay down debt with this money, we are paying for purchases that were made in the past. The purchases had an impact on the economy when they were made.

In my discussion with friend, family, and customers, I think most of them will spend at least some of the money they receive. Many people I have spoken with are looking to make home improvements or take a more expensive family vacation this summer with at least some of the money. A few of them are looking to use the money as a down payment on a new car. The more that is spent of this money the more it will help the economy.

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