The article below from Reuters News could provide great opportunities for home buyers hesitant to jump into a Jumbo loan program. By significantly raising the conforming loan limits, buyers with loans greater than the current $417,000 limit (but still within the yet-to-be-announced new limit) will enjoy a lower interest rate than were possibly now. Jumbo rates typically are at least 1/2% higher than conforming. Certainly welcome relief for San Diego home buyers. And we may see more refinancing as a result too. See the full article below… AARON SMITH - WWW.ROUTE56HOMES.COM
Article By: Patrick Rucker Fannie, Freddie eligible loans get $300,000-plus boost
WASHINGTON, Jan 24 (Reuters) - The size of home loans that may be bought or insured by Fannie Mae FNM.N, Freddie Mac FRE.N and the Federal Housing Administration would rise by more than $300,000 under an economic stimulus plan pitched by the U.S. House of Representatives.
Under the plan outlined Thursday, Fannie and Freddie would be permitted to invest in home loans valued as high as $729,750 for one year, while the FHA would be be permitted to indefinitely insure loans up to that level. Currently, Fannie Mae and Freddie Mac loans are capped at $417,000, while FHA loans may not exceed $367,000.
Since the summer, investors have shunned home loans that did not pass through Fannie Mae, Freddie Mac, or the FHA as they watched Wall Street firms take big losses on their risky home loan investments.
Fannie Mae and Freddie Mac are publicly trade companies that hold federal charters to nurture the nation’s housing market, while the Federal Housing Administration, set up after the 1930s depression, helps borrowers win favorable loan terms by guaranteeing mortgage payments to lenders.
The government ties of all three enterprises have been appealing to investors as the housing market has been rocked by a spike in foreclosures.
LOWER COSTS EXPECTED
Proponents of reform say the new loan levels will draw investors back into the home loan market, resulting in lower costs for mortgage borrowing. In recent months, the interest rate on high-cost loans has been about 1 percentage point above that for mortgages that could be financed by Fannie Mae and Freddie Mac.
Prospective home buyers in costly regions like California, Northern Virginia and New York have faced higher mortgage rates and tougher loan terms, and those areas would get relief under the plan, said Susan Wachter, a professor of real estate and finance at the Wharton School of the University of Pennsylvania.
“This is meaningful because the mortgage crisis and meltdown is geographically concentrated,” she said. “This response will assist the stressed areas” by lowering the cost of home ownership.
Thursday’s plan has been broadly endorsed by the U.S. Treasury Department and both Democrats and Republicans in the House of Representatives. Members of the U.S. Senate have yet to weigh in, and they could demand changes to the plan meant to boost the flagging economy.
And while Treasury broadly supports the initiative, it has long opposed giving Fannie Mae or Freddie Mac more investment powers before Congress ratifies root and branch reform legislation.
James Lockhart, the director of the Office of Federal Housing Enterprise Oversight that regulates the two, said in a statement that his agency was “very disappointed in the proposal to increase” the loan limits. As the main regulator for Fannie Mae and Freddie Mac, Lockhart has warned that he does not have the oversight tools he needs and so the companies’ business should not be allowed to expand.
Other industry critics have cautioned that Fannie Mae, Freddie Mac and the Federal Housing Administration are playing an outsized role in the housing market that is too risky and draining business from fully-private firms. (Editing by Leslie Adler)