By NAR 2013 President Gary Thomas
Last week I met with Ed DeMarco, Acting Director of the Federal Housing Finance Agency. We had a very positive discussion in which I reiterated NAR’s position of opposing lower conforming loan limits for Fannie Mae and Freddie Mac.
Earlier this year, NAR acknowledged the reduction of current FHA limits from $729,500 to $625,500 at the end of the year. However, we believe that further action of lowering the size of mortgages for Fannie and Freddie now would disrupt the housing finance market and negatively impact the availability of affordable housing credit.
NAR Research estimates that if the national conforming limit were lowered to $400,000, roughly 154,000 total mortgages and 49,000 purchase mortgages would have been impacted in 2012.
Many of these borrowers would not have qualified under the high minimum down payments and tight credit standards currently required by the private market. For example, one bank offered a loan to borrowers with an average credit score of 769 that required nearly a 34 percent down payment.
How many buyers have this much to put down on a home, especially first-time buyers.
Furthermore a number of changes are already in the wind. In January, many adjustments to Dodd-Frank changes will take effect, including the new QM rules. We expect the QRM rules to follow shortly after, as well as actions by the Federal Reserve.
The housing market is coming back, but its recovery is still fragile. It’s crucial that the federal government act to maintain market stability, not add disruptive and unnecessary changes at this critical time.
Many in the industry agree with us. NAR initiated the call to not lower the limits in a letter to Acting Director DeMarco September 19th and spearheaded a coalition of more than a dozen trade groups to show broad-based, grass roots support for maintaining loan limits at this time. Let’s hope our positive discussion with Acting Director DeMarco has resonance.
I believe he understands our message: Let’s enact what has already been decided. Regarding the rest, for now, just let it be.
By NAR 2013 President Gary Thomas
If you’re considering how nice it would be to own a larger home, this may be the time to buy.
For the first time in history, interest rates on jumbo mortgages actually fell below the interest rate of conforming 30-year fixed-rate loans.
As REALTORS® well know, jumbo loans are those over the local limit that can vary from $417,000 to $729,750, depending on the county.
Traditionally, consumers who needed a home loan bigger than a conforming mortgage would pay a higher rate of interest for the privilege of borrowing more money—often a quarter of a percent or greater, and for a brief period it was nearly two percentage points.
But with mortgage rates much higher than a year ago and declining profits from refinances, banks have become more aggressive in pricing mortgages. As a result, it is now cheaper to borrow in the jumbo market which is currently dominated by private lenders.
With interest rates at historic lows, more buyers are willing to stretch to buy bigger properties and more buyers are able to qualify for a jumbo loan. But even non-jumbo home buyers should look into the competitive rates at banks and credit unions.
There’s no telling how long it will continue, but this unusual circumstance may offer an opportunity for REALTORS®. Think big!