Feb 16, 2008
As part of Washington’s $152 billion fiscal stimulus plan, established to provide rebates to taxpayers, an essential element of the plan will also raise the conforming loan limit on home mortgages. The new limit will permit the Government Sponsored Enterprises (GSEs) to purchase mortgages up to $729,750 until December 31, 2008, after which time the previous limit of $417,000 will go back into effect again. The purpose of the increase is to inject some temporary and desperately needed confidence and liquidity into a scared mortgage bond market. This means that Fannie Mae and Freddie Mac, both GSEs which are private corporations chartered by the federal government, will be able to purchase and guarantee loans over the previous $417,000 limit so that lenders will be able to sell these mortgages on the secondary market to help generate some liquidity. Many investment sources for mortgage-backed securities dried up after the chaos erupted in the sub-prime market last summer. Investors had abruptly stopped buying mortgage-backed securities if the loans behind them could not be sold to the GSEs, namely Fannie Mae and Freddie Mac.

A key provision of the bill is that it is effective for mortgages originated between July 1, 2007 (making it possible for lenders to get some of these older loans sold and off their books) and December 31, 2008. Therefore new mortgages which are originated before the end of the year, either for a refinance or for a purchase, will qualify for this new higher limit. The Department of Housing and Urban Development (HUD) has 30 days from the date the bill was passed, on February 13, 2008, to publish the median home price data applicable throughout the country, then the new conforming limit will be 125% of the median home price of the HUD designated region or area. This maximum is not to exceed $729,750 nor will it be less than the previous maximum of $417,000. It is likely that only a few urban areas, all located within the state of California, will likely qualify for the maximum limit of $729,750. For homeowner’s who have jumbo mortgages (loans in excess of $417,000), this news should provide some welcome relief as they are now eligible -until the end of 2008- for the low interest rates previously permitted only conforming loan borrowers

Jumbo Rates Not Likely to Drop as Much as Expected

Feb 23, 2008
The announcement last week outlining a temporary increase in the conforming loan limit by the GSEs (Fannie Mae and Freddie Mac) may not prove to be the remedy it was initially thought to be. The temporary increase in the limit, up to 125% of the median home price in an area (to a maximum of $729,750) was thought to be the antidote the non-conforming (or jumbo) borrowers were waiting for. But after revealing further details of the plan it will not likely be the cure-all expected for the non-conforming segment of the market. While increasing the conforming loan limit as part of the government’s fiscal stimulus plan was initially perceived as a vehicle for increasing demand for non-conforming mortgage-backed securities, the execution of the plan may not yield the anticipated result because while Fannie Mae and Freddie Mac will be permitted to guarantee and purchase loans to a maximum amount of $729,750, these securities will not be traded in the critical area of the secondary market which would make a drop in interest rate feasible for non-conforming borrowers. Mortgages in excess of the previous conforming limit of $417,000 are not going to be placed into the same mix of loans and are not to be traded on the all important TBA (To Be Announced) area of the secondary market which would in turn generate the liquidity needed to produce a substantial drop in rate. Apparently because of the larger loan size, the relative loan risk is higher and therefore the rate will reflect this higher risk. This concept is in stark contrast with the CDOs (Collateralized Debt Obligations) which created the sub-prime mess by blending the high risk sub-prime loans with low risk prime loans.

Loans meeting the new higher limits should be eligible for purchase by the GSEs and subsequently securitized by Wall Street sometime during the second quarter of this year. Prior to the fall-out in sub-prime lending, the interest rate spread between conforming and non-conforming loans had fallen to as little as .25%, beating the previous standard spread of approximately .50%. However after the problem in the sub-prime market came to light and the investors of mortgage-backed securities disappeared, the spread between the two segments has grown to as much as 1%. The hope now is that under the new proposed limit, this spread will return to the norm of .50% which will still be a terrific boon for non-conforming/jumbo loan borrowers but not the windfall that was perhaps hoped for.

FHA 2008 Mortgage Limits Published: Read FHA Mortgagee Letter 2008-06 for the full details.

Effective March 6, 2008, HUD will offer temporary FHA loan limits that will range from $271,050 to $729,750 (Limits). Overall, the change in loan limits will help provide economic stability to America's communities and give nearly 240,000 additional homeowners and homebuyers a safer, more affordable mortgage alternative. The maximum amount of $729,750 will only be applicable to extremely high-cost metropolitan areas. Previously, FHA's loan limits in these very high-cost areas were capped at $362,790.

The Economic Stimulus Act of 2008 permits FHA to insure loans on amounts up to 125 percent of the area median house price, when that amount is between the national minimum ($271,050) and maximum ($729,750). The new minimum and maximum loan limits are based on 65 percent and 175 percent of the conforming loan limits for Government-Sponsored Enterprises in 2008, which is $417,000. The FHA used a combination of existing government data sets and available commercial information to determine the median sales price for each area. The change in loan limits are applicable to all FHA-insured mortgage loans endorsed with HUD’s publication of the increased loan limits today, and it lasts until December 31, 2008.

By increasing loan limits nationwide, FHA will provide much needed liquidity and stability to housing markets across the country. Already, as conventional sources of mortgage credit have been contracting, FHA has been filling the void. From September to December 2007, FHA facilitated more than $38 billion of much-needed mortgage activity in the housing market, more than $15 billion of which was through FHASecure, FHA's refinancing product. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated with exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.

"This is not an easy crisis to address, and there is no silver-bullet, but I know that we can help hundreds of thousands of people keep their homes, and we can calm the waters," said HUD Secretary Jackson.

In January 2009, FHA's maximum loan limit will return to $362,790, unless the U.S. Congress approves bipartisan legislation to permanently increase loan limits as part of the FHA Modernization bill, which is still awaiting final approval on Capitol Hill.

MSA Name	MSA Code	Division	County Name	County Code	State	One-Family
KNOXVILLE, TN (MSA)	28940		ANDERSON	001	TN	$271,050
SHELBYVILLE, TN (MICRO)	43180		BEDFORD	003	TN	$271,050
NON-METRO	99999		BENTON	005	TN	$271,050
NON-METRO	99999		BLEDSOE	007	TN	$271,050
KNOXVILLE, TN (MSA)	28940		BLOUNT	009	TN	$271,050
CLEVELAND, TN (MSA)	17420		BRADLEY	011	TN	$271,050
LA FOLLETTE, TN (MICRO)	29220		CAMPBELL	013	TN	$271,050
NASHVILLE-DAVIDSON--MURFREESBORO, TN (MSA)	34980		CANNON	015	TN	$432,500
NON-METRO	99999		CARROLL	017	TN	$271,050
JOHNSON CITY, TN (MSA)	27740		CARTER	019	TN	$271,050
NASHVILLE-DAVIDSON--MURFREESBORO, TN (MSA)	34980		CHEATHAM	021	TN	$432,500
JACKSON, TN (MSA)	27180		CHESTER	023	TN	$271,050
NON-METRO	99999		CLAIBORNE	025	TN	$271,050
NON-METRO	99999		CLAY	027	TN	$271,050
NEWPORT, TN (MICRO)	35460		COCKE	029	TN	$271,050
TULLAHOMA, TN (MICRO)	46100		COFFEE	031	TN	$271,050
NON-METRO	99999		CROCKETT	033	TN	$271,050
CROSSVILLE, TN (MICRO)	18900		CUMBERLAND	035	TN	$271,050
NASHVILLE-DAVIDSON--MURFREESBORO, TN (MSA)	34980		DAVIDSON	037	TN	$432,500
NON-METRO	99999		DECATUR	039	TN	$271,050
NON-METRO	99999		DEKALB	041	TN	$271,050
NASHVILLE-DAVIDSON--MURFREESBORO, TN (MSA)	34980		DICKSON	043	TN	$432,500
DYERSBURG, TN (MICRO)	20540		DYER	045	TN	$271,050
MEMPHIS, TN-MS-AR (MSA)	32820		FAYETTE	047	TN	$271,050
NON-METRO	99999		FENTRESS	049	TN	$271,050
TULLAHOMA, TN (MICRO)	46100		FRANKLIN	051	TN	$271,050
HUMBOLDT, TN (MICRO)	26480		GIBSON	053	TN	$271,050
NON-METRO	99999		GILES	055	TN	$271,050
MORRISTOWN, TN (MSA)	34100		GRAINGER	057	TN	$271,050
GREENEVILLE, TN (MICRO)	24620		GREENE	059	TN	$271,050
NON-METRO	99999		GRUNDY	061	TN	$271,050
MORRISTOWN, TN (MSA)	34100		HAMBLEN	063	TN	$271,050
CHATTANOOGA, TN-GA (MSA)	16860		HAMILTON	065	TN	$271,050
NON-METRO	99999		HANCOCK	067	TN	$271,050
NON-METRO	99999		HARDEMAN	069	TN	$271,050
NON-METRO	99999		HARDIN	071	TN	$271,050
KINGSPORT-BRISTOL-BRISTOL, TN-VA (MSA)	28700		HAWKINS	073	TN	$271,050
BROWNSVILLE, TN (MICRO)	15140		HAYWOOD	075	TN	$271,050
NON-METRO	99999		HENDERSON	077	TN	$271,050
PARIS, TN (MICRO)	37540		HENRY	079	TN	$271,050
NASHVILLE-DAVIDSON--MURFREESBORO, TN (MSA)	34980		HICKMAN	081	TN	$432,500
NON-METRO	99999		HOUSTON	083	TN	$271,050
NON-METRO	99999		HUMPHREYS	085	TN	$271,050
COOKEVILLE, TN (MICRO)	18260		JACKSON	087	TN	$271,050
MORRISTOWN, TN (MSA)	34100		JEFFERSON	089	TN	$271,050
NON-METRO	99999		JOHNSON	091	TN	$271,050
KNOXVILLE, TN (MSA)	28940		KNOX	093	TN	$271,050
NON-METRO	99999		LAKE	095	TN	$271,050
NON-METRO	99999		LAUDERDALE	097	TN	$271,050

FHA Mortgages Aid Borrowers in Need

New York Post

December 16, 2007

"As mortgage delinquencies continue to expand, a bill that would help financially-strapped New Yorkers was passed in the Senate on Friday...The Senate measure would raise the ceiling on home prices covered by the Federal Housing Administration Secure Loan to $417,000 from $363,000 - which should help out thousands of additional area homeowners. The House measure pegs the limit at $500,000...

"The FHA program has been a smashing success - more than 43,000 families saved their homes in a little more than three months. 'The FHA Secure Loan program is better than the rate-freeze program,' said Gregg Marcus, the managing director of Somerset Mortgage Lenders, a 28-year old mortgage banker based in Melville, 'because it offers a permanent fix'...

"Victor Stuart was 23 years old when he and his wife bought their dream house in Flushing - putting down no money and getting a $190,000 fixed-rate mortgage to cover 100 percent of the cost of the wood-frame house. The $1,700 monthly nut was easy. But then things went bad. Real bad...'While I was able to stay current on my mortgage, I started running up some serious credit card debt...' In 2000, unable to keep up with the credit card debt, the Stuarts took out a second mortgage, a five-year, fixed-rate loan for $80,000 at 12 percent. This past August, the ARM reset to 11.13 percent and the monthly bill soared 33 percent to $4,000. "There was no way I could have survived at that level," said Stuart..." In September, just weeks after President Bush unveiled the FHA Secure Loan, the Stuarts qualified and closed on a 30-year 6.75 percent fixed-rate mortgage. The monthly payments are $3,000 - about $1,600 a month less than under the reset ARM plus taxes. The family is able to keep their home and the weight of unwieldy bills has disappeared."

Down Payment Gifts for FHA Loans

The down payment for an FHA mortgage can be 100% gift funds. This is one of the key benefits to the FHA program.

Verification of the source of gift money is not required. However, it is necessary that the gift funds be deposited in the borrower's bank or savings account, or in an escrow account, prior to underwriting approval. Proof of deposit is required.

Gift donors are restricted primarily to a relative of the borrower. They can also be certain organizations, such as a labor union or charitable organization. Contact your local branch for complete information.

What Are Closing Costs?

There may be closing costs customary or unique to a certain locality, but closing costs are usually made up of the following:

• Attorney's or escrow fees (yours and your lender's if applicable)
• Property taxes (to cover tax period to date)
• Interest (paid from date of closing to 30 days before first monthly payment)
• Loan origination fee (covers lender's administrative costs)
• Recording fees
• Survey fee
• First premium of mortgage insurance (if applicable)
• Title insurance (yours and your lender's)
• Loan discount points
• First payment to escrow account for future real estate taxes and insurance
• Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
• Any documentation preparation fees

Streamline Refinancing for FHA Mortgages

FHA has permitted streamline refinances on insured mortgages since the early 1980's. The word “streamline” refers only to the amount of documentation and underwriting that needs to be performed by the mortgage company, and does not mean that there are no costs involved in the transaction.

The basic requirements of a streamline refinance are:

• The mortgage to be refinanced must already be FHA insured.
• The mortgage to be refinanced should be current (not delinquent).
• The refinance is to result in a lowering of the borrower's monthly principal and interest payments.
• No cash may be taken out on mortgages refinanced using the streamline refinance process.

Companies may offer streamline refinances in several ways. Some companies offer "no cost" refinances (actually, no out of pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the company pays any closing costs that are incurred on the transaction.

Companies may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by an appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed what is currently owed, i.e., closing costs may not be added to the new mortgage with those costs either paid in cash or through the premium rate as described above. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal and, thus, closing costs may not be included in the new mortgage amount

FHA Single Family Adjustable Rate Mortgages

FHA’s single family ARM program provides mortgage insurance for a person to purchase or refinance a principal residence at a lower initial interest rate. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.

What are the eligibility requirements?

• Borrower must meet standard FHA credit qualifications.
• Borrower is eligible for approximately 97% financing. Borrower is able to finance closing costs and the uppermost mortgage insurance premium into the mortgage. The borrower used to determine the interest rate is the U.S. Treasury Security adjusted to a constant maturity of one year.
• Eligible properties are one to four unit structures. will also be responsible for paying an annual premium.
• ARMS can only be used in conjunction with Sections 203(b), 234(c), and 203(k).
• The index