) had been signed into law as of Feb 13th. 2008. It might be a while before we see changes to Jumbo loans.
I mentioned HUD, Median House Prices, MSA's, High Cost Areas, Rates, Pricing, Fannie and Freddie. I should also have thrown in the OFHEO. They all play an important part in slowing down the enactment of this new law. Here is your cliff notes version of the players and what role they play. Let's take them one at a time.
HUD - This is the federal department that oversees the big picture of Housing and Urban Development (hence the initials). According to the new law they have up to 30 days to construct something called "revised median house prices and principal obligation limits". To you and me this is a table of who gets to be bumped higher and who get's a little nudge. Here's a sample of hat the table might look like: LINK
Median House Prices - Median means the middle. It doesn't mean the average.
In the following sequence of numbers, 3 5 16 99 1,288
The number sixteen would be the Median. So HUD needs to look at complex metropolitan areas, do some math, and construct the above mentioned table. When you have an area like Palo Alto sitting next to East Palo Alto the Median can be somewhat skewed. What is HUD to do? They back up. Instead of making determinations by city, or zip code, they've divided the country up into MSA's.
MSA's - Metropolitan Statistical Areas. A fancy name for looking at bigger areas. The boundaries are determined by the census department. Our MSA here is # 41860. It includes the greater bay area. Here's a list of all the MSA's: LINK
High Cost Areas - Once the determination of Median and MSA has been made they will the law sets forth the determination of High Cost Areas. This is important. According to what we all think is going to happen, the Bay Area is going to be labeled a High Cost Area. Nearby Sacramento Area isn't going to be so lucky. The best guess is that the maximum loan amount in the Bay Area will be $729,750 (which is the max provided by law). Poor Sacramento will only bump up from $417,000 to $419,630. No Joy in Mudville.
Can you see why it's so important?
Rates and Pricing - I'll lump them together. Fannie and Freddie will probably add something to formula on the new jumbo conforming loans. Here's how it might work. If the loan is above $417,000 they'll still do the loan, but there will be an add to the rate or it might cost a you something in points to get that loan. This is nothing new. They do this already. You might have an add for your credit score or your loan to value. You can bet that the will add something for the increase risk the new loans contain.
Fannie and Freddie - They are a GSE (Government Sponsored Enterprise). You didn't go to them for your loan. They didn't lend you the money to buy. But they set the rules (guidelines) that the underwriter who approves your loan has to abide by. Once HUD does their thing - they need to update their guidelines for the new limits.
OFHEO - hang on a second! Nobody mentioned the OFHEO yet. They are the governing body of both Fannie and Freddie. Remember it was the head of the OFHEO, James Lockhart who said, "We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform." That was before the law was signed. He's still pissed. The OFHEO has yet to rule if ARM loans are included or duplexes, or interest only loans are to be included.
Summary
So as of right now - NOBODY knows anything for certain.
SunTrust Mortgage, (a big conforming lender) put out this to their reps,
"If we layer on the likely guideline and product restrictions (e.g. 90% LTV, no IOs, etc.), based on industry data as well as our own, we estimate that around 15% of current non-agency volume would be eligible."
Doug Duncan, chief economist for the Mortgage Bankers Association, says it will take lenders three to six months to make technical changes so their systems can process the larger loans. Six months from now it'll be August!
Don't forget that the rates we are talking about are determined by Mortgage Backed Securities. Those securities have investors. What those investors are willing to pay determines the interest rates. Right now, nobody has a clue as to what those investors are willing to pay. Not even the Investors.
Yes, this is a long post. But all those entities play a significant role in the final outcome. And now you are more informed about those entities than all the other people around the water cooler. Good for you!
This wasn't in one of their Listings but an Open House of their Office. It was Client Appreciation Day!
Not to stop there, they combined this all with 
Good for you Security Pacific!
Here's the good news. The bad guys lost.
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