Real Estate/Finance gurus (1 Viewer)

[Taurus]

I thought about adding this to the old thread on the stimulus package, but decided to start a new one since the thing has been signed so we can discuss the evolving situation in the real-estate market.

So, now that we have the new, higher limits on "conforming" loans and seeing as how they're backdated to last July, it seems like I should be able to buy a house now with a "jumbo" loan and see my rate fall as soon as whichever lender I'm with writes up new policies, right?

We put an offer on a home in California that would ordinarily be a "jumbo" loan. We're trying to finance around $550k with 5% down.

First, is anybody lending on 5% down anymore? There used to be tons of programs with an 85% first and a 15% second, but I'm having a hard time finding them.

Second, with the new, higher conforming limits, can we get a loan for 95% of the value and let it 'reset' to a conforming loan once the changes have percolated through the system? (Which might even be better, since I'm positive the house will appraise for much higher once we've moved in)

What changes do you experts see forthcoming and how soon will they take effect?

 

[dapperdan]

The information I'm getting from lenders is that the new conforming loan limits probably won't go into effect for approximately 6 weeks. HUD will announce impacted MSAs in mid March, and then it will take another few weeks before the underwriting engines (DU and LP) are properly updated. At least that's what I'm hearing. This is coming from pretty credible sources.

I got this email from a major lender rep last Friday (2/22), straight cut and paste of the email:

(I've deleted the lender name) will implement the higher loan limit as quickly as possible. Before we can accept applications with the higher loan amounts, the following information must be determined:

· Impacted Metropolitan Statistical Areas (MSAs)

· Credit Policy and Automated Decisioning details

· Conventional and FHA Pricing information

At this time, we are unable to provide an estimated delivery date because the decisions made will impact how quickly we can execute our plan.

Impacted MSAs

HUD has 30 days from the day the President signed the package into law to identify the impacted MSAs – meaning sometime in mid-March, all mortgage lenders will simultaneously receive the official notification.

Although several mortgage lenders have promoted lists of what they believe the new limits will be, these are only estimates because HUD has yet to determine the higher loan limits. We know that HUD will determine the new loan limits based on the median area sales prices. But, we do not know what timeframe will be considered … will it be the:

· previously published prices from the third quarter of 2007?

· yet-to-be announced prices from the fourth quarter of 2007?

· yet-to-be announced prices for the entire 2007 sales year?


Because of the changes in the mortgage industry, the median area sales prices may be dramatically different throughout the year. So the timeframe used by HUD to determine the higher loan limits is key.

We expect the impacted areas to be announced in mid-March and remain in effect until Dec. 31.

Credit Policy and Automated Decisioning details

Our Agency Relations and Credit Policy teams are working closely with Fannie Mae and Freddie Mac to negotiate guidelines for the loan amount increases. We expect the credit policy applicable to the higher loan limits will fall between our current conforming and nonconforming guidelines (with consideration for minimum credit score, maximum debt-to-income, LTV/CLTV limits, property types, documentation levels, transaction types and other important parameters).

Also, Fannie Mae and Freddie Mac have indicated that they may not update their decision engines (Desktop Underwriter® and Loan Prospector®) for the temporary loan limit increases; therefore, some manual workarounds will need to be used.

As for FHA, we anticipate the guidelines for higher loan limits will be similar to the existing FHA programs with some potential differences for loan amounts higher than $417,000.

Conventional and FHA Pricing information

Pricing for the new loan amounts is yet to be determined by Fannie Mae, Freddie Mac and secondary markets. However, we believe loans with higher limits will cost more … and the additional cost will probably be passed through as an adjuster. Wall Street has indicated these transactions will trade like nonconforming loans.

We also anticipate a higher cost than current GNMA I and II pricing for FHA.

Answers to frequently asked questions

What should I tell clients who call me with questions?
· Acknowledge that the Economic Stimulus Package – including the loan limit increases – is getting a lot of media coverage.

· Explain that final details have not been released and offer to contact the client when more information is available.

· Enforce the fact that not all areas of the country will benefit from the loan limit increases – there will be increases for some high-cost areas for Fannie Mae and Freddie Mac loans and potentially all areas for FHA loans.

Will loan limits for Fannie Mae, Freddie Mac and FHA increase to $729,750 in all areas?
No, not all areas will offer loan amounts up to $729,750. In mid-March, HUD will announce the higher loan limits, identified by Metropolitan Statistical Areas.

Are the higher FHA loan limits a part of the FHA Modernization Act?
No. There are many other changes for FHA loans included in the FHA Modernization Act, which has not been passed by Congress.

Will the down payment requirement change for FHA?
Decreasing the downpayment requirement from 3% to 1 1/2% is part of the FHA Modernization Act, not the Economic Stimulus Package. The FHA Modernization Act has not been passed by Congress.

Will reverse mortgages be able to offer the higher loan limits?
No. FHA and Fannie Mae have confirmed that their reverse mortgage products are excluded from the higher loan limits as part of the Economic Stimulus Package. FHA reverse mortgage loan limits may be increased as part of the FHA Modernization Act which has not been passed by Congress.

Note: Reverse mortgages are currently offered through Wholesale to certified brokers only.

Are loans already in the pipeline available for the loan limit increases?
Senior management will determine migration details for existing pipeline loans as soon as possible. Migration decisions can not be made until we have answers regarding pricing and new credit policy guidelines.

Will there be an adjuster for the higher loan limits?
While we do not have final details, we believe Fannie Mae/Freddie Mac loans with higher loan amounts will cost more and the additional cost will be passed through as an adjuster. We also anticipate a higher cost than current GNMA I and II pricing for FHA.

 

[Taurus]

Thanks, Dan. While some of the acronyms are meaningless to me, the English part makes it sound like they're aware that some 'grandfathering' will have to be done or people will just sit on their hands and not buy anything for two months, which would put the whole system into a tailspin. They just can't release details of how that retroactivity will work since they honestly don't know yet.

I've seen some programs that offer 95% financing with pretty high rates (currently, since they're still considered "jumbo" loans) that can be refinanced for free if the new program saves $150/month or more. Would one of those be a good idea? A little temporary pain now (since the payment would be around $4,300 instead of $3,600) for another 29-1/2 years of happiness later, once the new policies are announced and we refi to the new non-jumbo rates?

 

[Taurus]

What about a 3/1 ARM, under the assumption that we'll refi the moment the new non-Jumbo rates/policies go into effect?

 

[varanook]

umm, 4300 house note, wow.

 

[dapperdan]

What about a 3/1 ARM, under the assumption that we'll refi the moment the new non-Jumbo rates/policies go into effect?

That's a very attactive option right now. Rates in the mid-4's.