I just got word from one of the mortgage guys who sends me regular e-mail that FHA is leaving their loan limits unchanged. This means that the highest they'll go is $362,750 (in the DC Metro area where I work). Sure there are condos, townhomes and even some single family homes out there in that price range but the SFHs will either be fixer uppers, small or in neighborhoods that never caught the wave of price appreciation (or as much).
I thought FHA was out there to help moderate income folks who wanted to get a little piece of the American Dream. I guess they're thinking prices are going to either stagnate or decline -- or their action will cause prices to stagnate or decline.
Now, those with moderate incomes will be subject to the conforming rules ($417,000, which is not much better) and be subject to higher interest rates.
Well, that's the government fo ya!
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GNMA doesn't want to follow Freddie on loan losses. I agree FHA needs to get on the bandwagon..but it's not going to happen any time soon. They already have added FHA secure....first big change in awhile.... let's face it ..in many areas prices are too high and they need to come down through market action...in many cases foreclosures of those who had no business getting a house in the first place and had no skin in the game...and second..those looking to purchase are looking to find a bottom...why buy if the market is still tanking? since 100% loans are pretty much gone... people having to come up with the down payment for first time buyers is tough. It's back to basic agency loans and first timers are going to have to come to the table with CASH...... biggest hurdle to homeownership is the down payment!
i have been told by many wholesale and bank shops that FHA is NOT the new subprime..... i think it will stay ugly for awhile longer....THEN the are going to be some nice buys!
good post....wish there was better news out there on the fHA front!
Look how long it took the VA to raise their limits. We just have to sit tight and let the banks and mortgage companies straighten out the mess they created before they are going to make very many changes. The first positive sign is the willingness to work with some homeowners to "freeze" their lower interest rates.
You took the words right out of my mouth! I was a bit surprised as well. If there were really thinking they would have "regional limits". But think of THAT nightmare!
Ken baby,
The House has sent legislation over to the Senate to "fix" this problem and to allow FHA to help bail out some folks from foreclosure. Trouble is some Republicans in the Senate don't want to upset the lobbiest gravy train they are on, so they are stalling it from coming up for vote, even though it passed in committee. Liz Dole is heading the effort.
It's the old story. The House (of the people) and the Senate (of the corporations) can't come to an agreement on legislation.
Answer - VOTE INDEPENDANT! Throw the incumbent bums out! Can you say oligarchy or plutocracy? If we don't have change in Washington that's what we'll have. Say goodbye to democracy.
Chuck
The FHA decision also left me wondering what they were thinking. FHA and VA have really improved their programs from what they used to be years ago (e.g. Streamline-K, etc.). I really thought that they would be leading the charge to stay with the times. Fact: the market drove prices up, up, up over the last few yesrs and even though prices have come down, they are nowhere near where they were and I don't believe that they will drop that far. . . this decision is a big disappointment.
Chuck - I believe you may be correct. I forgot that the NAR recently sent out a call to action to encourage our Senators to get with the program. I believe it's more to help people already in trouble within the current (low) loan limits (FHA Secure). My beef is with the loan limits. $362,750 doesn't get you much in this area.
Teri -- If prices decreased to the point that FHA seems to want them to go we'd wouldn't go into a recession we'd be in a full blown depression.
Ken: If you think the FHA limits don't do much around D.C., imagine being in California where the median home price is in the upper 6 digits. FHA is merely trying to help low to moderate income borrowers, not the middle to middle-upper class. It is really intended on looking at first time homebuyers and helping them get into houses as well.
Jeff - I'm with you and I feel for the folks in California trying to buy homes. That's why I'm surprised they didn't raise their limits even a little. As I mentioned in the Blog posting, they must really think there will be a steep decline in prices or they are trying to create a steep decline in prices.
I have come to the conclusion that the low income strata has been priced out of the market. What's done is done. Is it reasonable to cause prices to slide back artificially just because you want to help out low income folks? There are still a lot of moderate income first time home buyers that could use the FHA backed loans to purchase their first home.
Hey it's a full doc, verified loan. Why not raise the limits to provide some interest rate and down payment relief. Otherwise, we'll continue to have huge amounts of inventory. Yes, prices will start to decline even more. People who bought 7-10 years (or longer) ago will be fine. People who bought within the last 5-7 years will suffer the most.
Come on these government people don't need loans they have cash, so why change it! They just don't get it and even makes it hard for some of these people that want to refinance some of these loans.
Hey, Jeff
Thanks for the comment and thanks for the offer. I actually had to do a search for you and when your profile popped up there was a "Hidden From View" note next to your name. I have no clue as to what that's about.