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In less than a month, Fannie Mae and Freddie Mac will scale back the size of loans they buy from lenders, which some industry groups are saying will hurt home sales and could further dampen a housing market recovery. The drop in the conforming loan limit may make it more difficult for some buyers to purchase homes in expensive markets, housing experts say.

The current loan limits are set to expire Oct. 1. If an extension isn’t granted, the maximum mortgage amount in high-cost areas will drop from $729,750 to $625,500 (although that limit will vary throughout the country).

Some banks, such as Bank of America, have already stopped taking new applications for jumbo loans at the current rate so that they can process the ones already in the pipeline in time for the Oct. 1 deadline.

The drop in the conforming loan limit is expected to impact 2 percent of homes nationwide, but will have a much greater effect in some areas. For example, some analysts say 10 percent of the housing market in New York will be affected. 

Pamela Liebman, CEO of New York real estate company the Corcoran Group, told USA Today that the new loan requirements will “put a lot of buyers out of the market.”

Meanwhile, lobbying efforts are continuing, as several industry groups, including the National Association of REALTORS®, are urging Congress to act quickly on a two-year extension to maintain the GSE loan limit at $729,750. 

 Source: “Coming Loan Changes Could Squeeze High-Priced Home Markets,” USA Today (Sept. 6, 2011)

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

The proposed bill, Neighborhood Preservation Act of 2011 (H.R. 2636), calls on banks and the government-sponsored enterprises–Fannie Mae and Freddie Mac–to start renting out some of their foreclosed properties to and “stabilize home values and restore confidence in the housing markets.” 

The bill would authorize federally-chartered institutions to enter into a long-term lease — for up to five years — with the occupant of the property or with another person, and then at the end of the agreement provide an option to buy the home to the tenant. 

The bill could allow delinquent borrowers to remain in their homes but they would have to agree to pay rent and still sign over the deed to the bank or GSE, National Mortgage News reports.

According to the bill, this would allow the foreclosed property to remain occupied during the still-sluggish housing market and “preserve the property itself as well as the aesthetic and economic values of neighboring homes and even whole neighborhoods.”  

“As Americans across the country are affected by this unrelenting foreclosure crisis, it is imperative that Congress address this issue,”Congressman Gary Miller, R-Calif., who introduced the bill, said in a statement.

Source: “Bipartisan Bill Encourages GSEs to Rent Foreclosed Properties,” National Mortgage News (July 27, 2011) and “U.S. Lawmakers Back Bipartisan Foreclosure Aid Bill,” Reuters News (July 28, 2011)

Some of us in the Placerville, California region for over 3 years have wondered when the Fed’s would consider multiple options similar to this especially to the owners in foreclosure?

The private market is ready to fill the void when conforming limits on government-backed mortgages at Fannie Mae, Freddie Mac, and the Federal Housing Administration expire at the end of September 2011, Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee on Wednesday.

On Oct. 1, the maximum mortgage amount in high-cost areas is set to drop from $729,750 to $625,500.

“As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher-priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis,” Bernanke told the House committee. “I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost.”

The National Association of Home Builders has said that it fears more than 17 million homes nationwide will become ineligible for more affordable federal funding when the loan limit expires.

More information at: “Bernanke: Private Sector Ready for Conforming Loan Limit Drop,” HousingWire (July 13, 2011) and “Lower Mortgage Limits Are a ‘Trade-Off’ Bernanke Says,” CNBC (July 13, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

A sluggish housing market has caused millions of home owners to lose their home to foreclosure, short sale, or deed in lieu of foreclosure. But once these former home owners get a better handle on their credit, how long do they have to sit on the sidelines until they can secure future financing to buy a home again?

Fannie Mae and Freddie Mac have a three-year waiting period following a foreclosure, and a two-year wait following a short sale, deed in lieu, or discharge or dismissal of bankruptcy. However, if borrowers can justify that the circumstance for the foreclosure or bankruptcy occurred because of an illness or job loss — or other “extenuating circumstance” — that may help reduce their wait. But with no such extenuating circumstances, these former home owners may have to wait longer, even up to seven years following a foreclosure or four years after bankruptcy, the article notes.

For loans insured by the Federal Housing Administration, borrowers with perfect credit afterwards also will, in general, have to wait three years after a foreclosure and two years after a bankruptcy is discharged, The New York Times notes.

Following a short sale, borrowers will have to wait three years to secure another FHA loan — however, there are plenty of exceptions. Borrowers will have to wait three years if they were in default at the time of the short sale and had no extenuating circumstances. However, if the borrowers were on time with all their payments a year prior to the short sale, they may have no wait at all and might even qualify for an FHA loan immediately.

Source: “The Post-Foreclosure Wait,” The New York Times (June 23, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at:www.sierraproperties.com

C.A.R. today announced it has partnered with Fannie Mae on an initiative designed to help REALTORS® quickly resolve issues that may arise after a short sale offer is made on a Fannie Mae-backed loan.

The Fannie Mae Short Sale Assistance Desk (“Assistance Desk”) provides brokers and agents the ability to significantly shorten the wait time for approval on Fannie Mae short sale transactions.  The Assistance Desk also helps real estate professionals with the handling of post-contract issues such as loan servicer responsiveness, the existence of a second lien, or issues involving mortgage insurance.

The Assistance Desk leverages relationships between participating MLSs and their members to collect and submit information to Fannie Mae using a dedicated submission form on the MLS website.   Participating MLSs also provide Fannie Mae with data to improve property valuations, which can help lenders in making quicker approval decisions on short sale requests.  The Assistance Desk expedites the process so that a real estate professional will receive an initial response within one week confirming that the case has been reviewed.

More information at: http://www.car.org/newsstand/newsreleases/fanniedesk/ 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

Despite concerns about the negative long-term effects of federal stimulus efforts, including the impact they will have on the country’s huge budget deficit, the U.S. government continues to take action to help spur the economy.

By Lawrence Yun // | February 2011

However, the most effective solution for promoting growth and getting the housing market moving may rest with banks.

Residential mortgage loans that were originated in the last two years are among the best performing ever. Data from Fannie Mae and Freddie Mac show that 2009 mortgage originations have the lowest default rates in decades, with 1.2 defaults per 100 loans backed by Fannie Mae and 1.1 defaults per 100 backed by Freddie Mac. As recently as 2007 those figures were 28.7 and 22.3, respectively. 

Given the strength of recent loan vintages, you’d think lenders would be jumping back into the business of making mortgage loans. But in fact they’re holding back. At a time when home sales should be around 5.5 million units, based on the country’s population, we’re forecasting only 5.2 million sales for 2011, about the same as in 2000—when the U.S. population was smaller by 27 million people. 

Full article, at source:  http://www.realtor.org/rmonews_and_commentary/economy/1102_economy_lenders

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

Americans—both current homeowners and renters—still strongly aspire to own a home and to maintain homeownership, despite a slow recovering housing market, according to a study released by Fannie Mae.  However, demographic trends combined with financial caution among consumers are contributing to an increased willingness to rent. 

More than half (51 percent) of current homeowners and renters say that the housing crisis has not affected their overall willingness to buy a home, according to the study. However, while homeownership aspirations are high for the long-term, Americans have near-term doubts about buying.

Overall, according to Fannie Mae’s National Housing Survey third quarter results, one-third of Americans (33 percent) would be more likely to rent their next home than buy, up from 30 percent in January 2010. Among renters, 59 percent said they would continue to rent in their next move, compared with 54 percent in January 2010.

More information at: http://fanniemae.com/newsreleases/2010/5247.jhtml;jsessionid=44W3AER04RFVDJ2FQSHSFGQ

It’s not high interest rates preventing a housing recovery. The interest rates, currently around 4.25 percent, are historically low. What’s slowing down the housing market recovery is a weak economic recovery with little job creation. And according to the National Association of Realtors, NAR, the government agencies Fannie Mae and Freddie Mac are part of the problem in preventing a recovery. 

The California Association of Realtors has reported that nearly half of all opened escrows are failing to close. Lender turn-downs are primary reasons. The number has been so significant that “pending sales” are no longer considered an accurate indication of future closings.    

Golder sent a message from Realtors across the country, “The Federal Housing Administration, Fannie Mae and Freddie Mac, have a mission to provide mortgage liquidity to qualified home buyers, including low-and moderate-income families and first-time buyers. That mission is being impaired by unnecessarily restrictive limits on the availability of credit and these extremely tight policies are significantly delaying a housing market and economic recovery.”

The California Housing Finance Agency (CalHFA) reported this week that its “Keep Your Home California” program will be delayed because of logistical issues with the program. The program was scheduled to begin Monday, Nov. 1.

KEEP THIS IN MIND:

• The “Keep Your Home California” program is a $1.83 billion government aid program that will pay down loan balances and provide monthly cash assistance to struggling California homeowners.

• One of the logistical complications that has caused the delay is the fact that Fannie Mae and Freddie Mac last week instructed their loan servicers to participate in the program, dramatically increasing the number of potentially eligible homeowners.

• Funded with federal money, the program offers four different types of cash assistance for an estimated 100,000 low- to moderate-income California homeowners. Additionally, eligible borrowers must have endured some sort of loss of income.

• The two primary forms of aid include $875 million dedicated toward unemployed Californians who need help making their monthly payments, and $790 million to be used to directly reduce mortgage loan balances.

• Although the program has been delayed for several weeks, homeowners struggling to make their mortgage payments are advised to not wait for assistance programs to begin before contacting their servicer or lender. Instead, homeowners should begin working with their lender or servicer at the first sign of difficulty.

• More information about the “Keep Your Home California” program can be found at www.keepyourhomecalifornia.org. A toll-free hotline soon will be established. 

Other information at: http://www.sacbee.com/2010/11/02/3151100/california-expects-mortgage-aid.html  

The continual monthly bailout of Freddie Mac and Fannie Mae with unimaginable sums of money from the government is disturbing to taxpayers, but encouraged by Russia and China, the holders of huge portions of their bonds, since those countries do not want to suffer losses on their mortgage-related holdings. If they did, they would consider those losses financial warfare and retaliate.

For the homebuyer and the multiple listing service (MLS) market, support of the government as the lender of last resort must continue until the home prices in California stabilize for at least a two-year period and insolvent homeownership due to negative equities no longer exists. This means loan balance cramdowns or massive strategical defaults, and the sooner the medicine is taken by the lenders, the more quickly the MLS market place will recover for agents and homeowners.

Until then, the mortgage-backed bond market will not be attractive for anyone other than the Federal Reserve investment and treasury guarantees, implicit or actual.  [For more information on the future of Fannie Mae, see the February 2010 first tuesday article, The fate of our Fannie and Freddie]

These GSEs will eventually be dismantled and the government guarantees will be differently directed to keep the mortgage market viable until Wall Street gets its collective act together and fully returns to the mortgage-backed bond market. Wall Street was most adept at floating these bonds in the past, and they went way beyond the limits of government guarantees in the risky mortgages they were able to fund, package and resell to bond investors around the world.

This Wall Street Bankers are destined to do again — they only need some time to find their comfort zone. They figured out how to sell government-guaranteed mortgage-backed bonds without a hitch in early 2010 after the Feds quit purchasing all of the mortgage-backed bonds for over a year at the height of the financial liquidity crisis.

Thus both Freddie and Fannie will eventually be unnecessary since the private sector has demonstrated they can supply all the mortgage money homebuyers and apartment buyers need to do deals. Watch for a quiet fade into the past as their disappearance is exploited only by pundits and political types.

Re: “Freddie Mac seeks more aid amid loss” from the Wall Street Journal

Re: “Fannie Mae narrows loss, but asks for more aid” from CNNMoney.com

first tuesday take:  By Kelli Galippo

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