Office of Federal Housing Enterprise Oversight Director James B. Lockhart announced yesterday that the maximum 2008 conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac (the Enterprises) will remain at the 2007 level of $417,000 for one-unit properties for most of the U.S.

The conforming loan limit determines the maximum size of a mortgage that an Enterprise can buy or guarantee. By law the maximum conforming loan limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey (MIRS) of the Federal Housing Finance Board (FHFB). The FHFB reported the decline in the average price was $10,685 or 3.49 percent, from $306,258 in October 2006 to $295,573 in October 2007. The combined two-year decline is now 3.65 percent.

While many in the mortgage industry have felt that this number needs to increase, as the rise in property values in some states has outpaced this limit, the limit will remain the same…even though pricing indicators are showing a decline in values. This is good news for homeowners and mortgage professionals alike as a drop in this limit would make financing even more difficult and more expensive for the end user.

tags: fnma, financing, housing, loans, mortgages

Rumors this morning that Citibank re-packager Lown Home (catchy name right?) is not funding loans anymore. This is just a rumor at this point, but I would suspect that their time in the market may be numbered based on what I have heard and read from a number of different sources.

tags: economy, financing, home loan, mortgage, sub prime

For most borrowers with good to excellent credit (above a 620 FICO), there has not been too much shake-up with regards to what loan programs are available to them. However, there has been a big change in what people with sub-620 FICO scores now qualify for and have available to them. 6 months to a year ago, it was possible for just about anyone with a heartbeat and a FICO score north of 500 to get a bank loan that was not really that bad when you factored in the true credit risk of these borrowers. Clearly, this was a product of excess liquidity chasing mortgage backed securities. Well, times have changed a bit and the default rate on sub-prime loans in the very early stages has actually exceeded forecasts according to a Bloomberg article I read the other day. This means that more stingent rules for sub-prime borrowers will be coming down the pike shortly, making fewer programs available.

My best advice to people is to improve your credit scores…no matter who you are or what your scores are. There are always benefits to improving your FICO scores no matter what they currently are. I have seen lenders that give pricing benefits and options to borrowers when they hit the 820 FICO mark. FYI, the maximum FICO score is 850 and the worst is 300. Retaining your good credit and improving it is just as important as brushing your teeth every day. It is something that we all need to be dilligent about, not try for the quick-fix when we need a loan. Be pro-active not reactionary. We will be putting together a credit improvement system at Aventine that will be published on our website shortly.

tags: bad credit, credit, fico, financing, loans, sub prime

Let’s face it, nobody has all of the answers. While we can make educated guesses about where interest rates and real estate markets are going to go in the next year or two years, we really have no idea what is going to really happen. One thing that is very likely is that many real estate markets around the country that do not have the jobs and disposable income that they had 2 years ago are going to see prices correct more over the next year or two. Some people in these areas (most places in the country) just don’t seem to want to understand what drives real estate prices in our economy. In short, it is primarily the strength of jobs in that market. Obviously access to and the cost of money, aka interest rates, plays an important role as well as we have seen over the past 3 or 4 years.

But, access to money has changed dramatically over the past few months. What many people know is that there is something called the sub-prime market and it has been greatly affected by something. Basically, sub-prime lending focuses on borrowers with less than ideal credit. Typically, this means anyone with a sub 620-660 FICO score. Rates and terms are obviously worse for these types of loans. But, over the past few years, there has been so much liquidity, aka money available to lend, that the rates on sub-prime mortgages were quite low and the terms available were really unheard of. 100% LTV loans were available or very high LTV loans were available to just about anyone with a heartbeat. In short, that is no longer the case today and that is part of what is causing so many problems for many people today. My advice to anyone who is not able to refinance out of one of these loans right now because of lack of credit/equity…sell your property(s) now while you still can get out with what is left of your credit intact and maybe even some cash. Most of these people are scared out of their minds but, for whatever reason, will not entertain the idea of selling their house. It is a house, sell it, move on. Get your financial house in order, fix your credit and plan out your financial future.

Now for everyone else, it is time to re-evaluate where you are at in your financial timeline. You do know where you are planning on being in the next year, two years, five years and ten years down the road right? You have a plan for your children’s college and education, your retirement and living day to day, right? The bottom line is that a mortgage on a house is probably the biggest financial decision that most people will make in their lifetimes and most treat it like buying an apple in the store. The myriad of loan programs that are available today is pretty incredible and the only ones that can really be compared apples to apples is a conventional 30 year fixed-rate mortgage. Most people understand that this is probably not the loan they should be using to get the most out of a debt instrument as large as their home mortgage, but many do not.

If you have been floating for the past few years, refinancing in and out of short-term fixed rate loans or even using some kind of ARM or pay-option hybrid, now may be the right time to lock into something a little more permanent. The bond markets have been selling off a bit in the past couple of days and the outlook from the FOMC is not looking good with regards to inflation. Look, you have to be crazy if you don’t think the price of everything from chicken to beef to gas to homes has gone up dramatically in recent years, yet inflation has not been a front page news story for reasons unknown to me. At this point, my advice woulud be to re-evaluate your financial situation and goals and see how the tax-deductable debt you have on your home or investment property(s) is structured. Maybe you want a little more cash right now to pay for an addition, education, taxes or more importantly to pay off consumer debt (not tax deductable interest). Maybe you have a short term fixed rate loan that is going to come due in the next year and you would like to lock in for 3 to 10 years at today’s rates (good idea in my book). Whatever the case may be, you need to be mindful to what is going on in your financial world and how to best take advantage of the tools that are available to you today.

tags: debt, financing, interest rates, loans, mortgages