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As printed in the OC Register / Saddleback Valley NewsWritten by Jim E. Flynn, Century 21 Beachside Realtors, Lake Mission Viejo
Nov. 19, 2008
FHA Limits for California Borrowers to Decrease
Q. I heard that FHA limits for California borrowers will be decreasing by more than $100,000 starting in 2009. Can that be true?
- Steve D., Mission ViejoA. Yes, Steve, the FHFA (Federal Housing Finance Agency) has announced "new" conforming loan limits for 2009.
Although the lower limits will remain at $417,000 for most areas in the United States, limits for high-cost areas, including California, are now slated to be capped at $625,500, down from the previous $729,750 limit. And that is $104,250 less. The unfortunate issue is that limits for much of our Orange County needs are higher.
Despite the fact that price declines have increased the total number of homes eligible for conforming financing , Realtors and borrowers are disappointed that the $729,750 limit stipulated in the Economic Stimulus Act of 2008 signed in February was not made permanent,
So, what will the decrease of more than $100,000 in loan limits do?
The reduction in the loan limit to $625,500 will negatively impact both the interest rates and the availability of funds for jumbo mortgages. Borrowers are hoping that Congress will make the $729,750 limit permanent before the end of the year as one of the provisions in an economic stimulus package.
The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
Q. With the recent Dana Point/Marblehead bankruptcy scramble to re-group after these long 30 years, do you think foreclosures in Orange County will continue to rise in 2009?
- George, San ClementeA. I am hopeful, George, that by the end of this year foreclosures will have peaked. Fannie Mae and Freddie Mac will revise their programs and actually help borrowers. Citigroup, Countrywide and JPMorgan are initiating new plans to help borrowers avoid foreclosure.
Although, Jack Kyser, the chief economist of the Los Angeles Economic Development Corp. believes "there is little immediate hope for areas hardest hit by foreclosures" Mark Schniepp, economist and director of the California Economic Forecast, however, thinks by summer things will turn around because he said it usually takes about seven months after a peak in NOD'S (Notices of Default) for foreclosures to hit the wall. The peak was last April so November or December should result in a down trending of foreclosures as we move into 2009 George. I am optimist that the picture for Orange County's housing market will start to clear and begin to focus toward recovery by this coming summer. A new state law is also helping that requires lenders to talk to borrowers 30 days before filing a NOD or demonstrate they have made an attempt to discuss options to avoid foreclosure. I am not at all sure, however, that having lenders "demonstrate they have made an attempt" is really enough "teeth" to result in an ongoing improvement or just delay the process.
Jim Flynn is a Realtor with Century 21 Beachside Real Estate in Mission Viejo. He has more than 30 years of home sales experience and belongs to the county, state and national associations of Realtors.
Original article in The Register
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Jim
Jim E. Flynn
CalBRE license #: 01215480
Phone: (949) 463-0739