Shrinking Dollars for High End of Homes

House values continue to fall, so who cares if top loan limits drop accordingly?

Well, agents and homebuilders care. Right now, about $729,000 is the biggest mortgage that will ‘conform’ to the cookie-cutter standards for the secondary market (that’s be the Federal Housing Agency as well as the notorious Fannie Mae and Freddie Mac). The limit is scheduled to drop to $625,500 on October 1. It’s academic for most of the country, as the average value of houses is bumping along around $200,000 or so.

But agents and The National Association of Home Builders are upset on behalf  of homeowners in California, New York, Boston and other high-cost markets, because home values inevitably will drop along with the mortgage ceiling. As part of the lowered ceiling, FHA limits will erode a bit for about 20% of the country’s counties, which happen to include 59% of the owner-occupied houses. The NAHB figures that loan limits will set back about 14%, or, an average of $58,060 in those counties.

There’s no question that the mortgage market is in a shambles. Fallout for homeowners is ruthless and relentless. As loan limits start to realign with market realities, the silver lining could be that property valuations settle down, too. These days, it’s the process of getting a loan that’s likely to disintegrate, not the amount of the loan itself. Resetting the limits might shore up lenders’ perspectives long enough for them to approve loans instead of back away.

Image courtesy of Morguefile contributor alvimann.

Like A Good Neighbor...Who's There?

If you live in a homeowners association – condo or single-family – chances are you have a very badly behaved new neighbor. Your neighbor doesn’t pay association fees – just because it doesn’t want to. Your neighbor doesn’t think it has any responsibility to the unit or house it bought, never mind to you.

Your new neighbor? A bank.

When association member homeowners go into foreclosure, they usually quit paying their fees first. Who picks up the tab? Yup. Other members. Then, if the homes slides into official foreclosure, it gets taken over by a lender. But the lender isn’t any better: most of them don’t pay fees, either.

The Community Associations Institutes (CAI) recently released a survey about the travails facing associations:

• 45% face “serious” problems because the housing downturn
• 9% face “severe” financial consequences due to the downturn
• 5% or more of all units are vacant at 25% of communities
• 65% of associations have at least 5% of members delinquent on fees – up from 19% in 2005
• 30% of associations have a delinquency rate of more than 10%

Associations don’t have to take this lying down. Real estate columnist Lew Sichelman reports that street-smart Florida associations are getting courts to declare that bank-owned units in arrears on fees are actually abandoned. That perked up the banks.

Here’s who else should get involved: the Federal Housing Authority, Fannie Mae and Freddie Mac. They have been tweaking lending rules for condos up, down and sideways, always keeping lenders off balance. The proportion of owner-occupied units, for example, has moved up and down, but is always subject to appeal.

Seeing the secondary lenders want to micromanage, why don’t they micromanage the banks to pay the dues for their mothballed units? Not doing so effectively forces other association members to pay taxes twice. If the banks don’t like it, we have a suggestion: pay for it out of your marketing budget. Consider it community relations – you know, being a good neighbor.

Image courtesy of Morguefile contributor jdurham.

Just In Case You Thought The Market Was Going to Overheat

Most homebuyers have to get mortgages, and now that we are back to the days of cookie-cutter mortgages, most people can only get deals that will fit on the Fannie , Freddie or Federal Housing Authority assembly line.

That’s why lenders and realty agents sighed in exasperation Friday when the Federal Housing Authority announced that the current limits for conforming mortgages will stay put. (Conforming mortgages is bureaucraticese for ‘cookie cutter.’)

The current state of affairs is that the limit is $417,000 for most areas of the country, and as much as $729,750 for ‘high cost’ areas, like New York and San Francisco.  The lenders’ argument is that raising the ceiling to $729,750 to all markets would revive the market because people would be able to get more loan.
Fortunately, the bureaucrats did not buy this ridiculous argument. With housing prices continuing to slide, and more predicted for 2010, there is no rationale for increasing the maximum loan amounts.

As pretty much every analyst now agrees, employment is the key factor for reviving the housing market. That, and working off the huge overhang of foreclosures and bank-owned properties. Raising loan limits would throw the market into confusion. What we need now is stability and consistency.

Memo to lenders: please focus your efforts on cleaning up the loan portfolios you now have, instead of trying solve a problem that doesn’t exist.

Image courtesy of Morguefile contributor emmip.

Fannie-Free Loans

Need a mortgage, but afraid to wade into the swamp of Fannie and Freddie-backed financing?

These days, they’re a bit distracted. There’s another way to get your deal done, and it’s right in your own back yard: local portfolio lenders.

What’s a portfolio lender? It’s a lender– usually a community, independent or regional banks or credit unions – that actually holds on to the loans it makes, in its own lending portfolio. That means that loan decisions are made individually, not on a conveyor belt of cookie-cutter loans all headed to the Fannie Mae and Freddie Mac paperwork mills. The bank makes the loan and collects the payments – all by itself!

If you don’t qualify for a Fannie or Freddie loan, a portfolio lender is one of your few hopes for getting a mortgage. Here’s who should be, this very minute, looking up their local portfolio lenders:

• The self-employed whose income vascillates, but who have strong credit history and scores
  
• Seeking a jumbo mortgage – that is, more than the Fannie and Freddie limits
  
• Seeking to buy a condo in a building whose owner-occupancy rates are out of line with Fannie and Freddie rules
  
• Looking to pull together a nontraditional deal of some sort, such as a live-work property
• Pursuing a combination loan of some sort, such as a mortgage and home improvement loan for a major renovation

How can you find such a virtuous and kind lender? Start with the bank where you have most of your accounts already. Hopefully they’ll be interested in serving a longtime customer. But if that’s not an option, the Independent Community Bankers of America is a good place to start.





Image courtesy of Morguefile contributor carl53.