2009 CONFORMING LOAN LIMITS INCREASED BY
AMERICAN RECOVERY AND REINVESTMENT ACT
WASHINGTON, DC –
The American Recovery and Reinvestment Act (ARRA), which
was signed into law on Tuesday, increased the maximum conforming loan limit for
mortgages originated in 2009. The increase affects 250 counties across the United States.
For these areas, identified in the attached table, Fannie Mae and Freddie Mac loan limits
will return to their late-2008 levels, which were up to $729,750 for one-unit properties in
the continental United States. Loan limits in other areas are not changed by the
legislation.
Conforming loan limits for 2009 were originally announced in late 2008 and had been
calculated under terms set forth in the Housing and Economic Recovery Act of 2008
(HERA), passed in July. The new ARRA legislation stipulates that, for loans originated in
2009, the loan limit is to be the higher of the 2008 limits and those originally calculated
for 2009 under HERA. Where the 2008 and 2009 limits differ, the 2008 limits tend to be
higher and thus, in most cases, loan limits are reverting back to last year’s levels. For the
relatively few counties where 2009 limits actually increased (43 counties in Virginia, North
Carolina, and California), the new limits will remain at the higher level.
Notable elements of the new legislation:
1. The Director of FHFA is given the authority to increase loan limits levels for “subareas”
under provisions in ARRA. Given the implementation difficulties associated
with establishing multiple limits for any given county, FHFA’s Director currently
has no plans to use this discretion.
2. The loan limits established under ARRA apply to all loans originated in 2009. For
loans purchased in 2009 that were originated from July 1, 2007 through December
31, 2008, the same limits will apply. For loans purchased in 2009, but originated
before July 1, 2007, the limits previously announced by FHFA on November 7 ,
2009 and updated in December will apply. For example, a $700,000 mortgage
originated in 2006 would not be eligible for purchase this year, even if the
applicable local limit under ARRA is $729,750.
Several lookup tables are available at www.ofheo.gov/Regulations.aspx?Nav=128 that
provide detailed information about local area loan limits. A full county listing is provided
showing loan limits for every U.S. county and county-equivalent. Also provided is a table
showing those metropolitan areas where the new 2009 loan limits exceed the baseline
$417,000 level for one-unit properties.
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.
Friday, February 27, 2009
Friday, February 20, 2009
Stimulus Plan Update
Tax Credit for HomebuyersFirst-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Tax Credit Versus Tax Deduction
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!
Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.
Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.
Higher Loan Amounts
More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the FutureAnother thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.
As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Tax Credit Versus Tax Deduction
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!
Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.
Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.
Higher Loan Amounts
More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the FutureAnother thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.
As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
obama foreclosure plan
here is an article on the new plans from the administration to help homeowners who may be facing foreclosure or trouble with their mortgage payments.
http://rismedia.com/2009-02-18/obama-unveils-plan-to-stem-foreclosures/
http://rismedia.com/2009-02-18/obama-unveils-plan-to-stem-foreclosures/
Thursday, February 19, 2009
Anyone get the impresssion the market doesnt like the bailout?
If you are like me you are watching the value of your retirment account take a free fall this week. The government bail out...I mean stimulus package...doesnt seem to be popular with Wall Street. The package isn't very popular with me either.
As I have more time to sift through all the information that is contained in this bill I will try to find information that will help the mortgage industry and home owners/buyers. The only good news is the $8000 buyer tax credit for folks who qualify. This was a $7500 credit last year when it was announced and it was more of a loan than a credit...now its a little better, but not as good at the 15k credit that was being discussed for a while there.
Owe more on your house than its worth? Do you wish you had a lower rate and payment without having to pay for a new loan or pay your balance down out of savings? If so you should love this package. The plan calls for 9 million homeowners to get their balances reduced or their rates/payment reduced to keep them from losing their home in foreclosure. I havent figured out how this policy will help the overall economy, but heck I am just a mortgage broker...what do I know?
Meanwhile...I am doing my best to help homeowners reduce their payment while rates are low through the more traditional way of renegotiating their loan terms...its called a refinance and you dont have to default on your payments to qualify. I am also seeing things lighten up a bit on the purchase market. Buyers seem to be more active and I still feel the housing market will hit bottom this year and we will have a good housing market in 2010.
I plan to put something together about rates in the next week or two...stay tuned and I will do my best to make an argument that rates will be going up this summer and now really is the best time to buy!
As I have more time to sift through all the information that is contained in this bill I will try to find information that will help the mortgage industry and home owners/buyers. The only good news is the $8000 buyer tax credit for folks who qualify. This was a $7500 credit last year when it was announced and it was more of a loan than a credit...now its a little better, but not as good at the 15k credit that was being discussed for a while there.
Owe more on your house than its worth? Do you wish you had a lower rate and payment without having to pay for a new loan or pay your balance down out of savings? If so you should love this package. The plan calls for 9 million homeowners to get their balances reduced or their rates/payment reduced to keep them from losing their home in foreclosure. I havent figured out how this policy will help the overall economy, but heck I am just a mortgage broker...what do I know?
Meanwhile...I am doing my best to help homeowners reduce their payment while rates are low through the more traditional way of renegotiating their loan terms...its called a refinance and you dont have to default on your payments to qualify. I am also seeing things lighten up a bit on the purchase market. Buyers seem to be more active and I still feel the housing market will hit bottom this year and we will have a good housing market in 2010.
I plan to put something together about rates in the next week or two...stay tuned and I will do my best to make an argument that rates will be going up this summer and now really is the best time to buy!
Thursday, February 12, 2009
great article on rates this week
check out this link. Rates are down this week...at the expense of the stock market it seems. http://custom.marketwatch.com/custom/alliance/ii/story.asp?pop=t&guid={DC86F104-3095-4B67-8CEE-CEA432501E87}&siteid=AFF09CA4-18F9-4453-800A-24CCB74BB780
Monday, February 9, 2009
Where did all the jobs go?
Friday the Labor Department released the Jobs Report and 598,000 jobs were lost in January, worse than expectations of 540,000 jobs lost. These mounting job losses are the worst seen since 1974. About 3.6 million jobs have been lost since December 2007. The Unemployment Rate is now at 7.6%.
Normally bad news translates into improved bond prices as investors move their money into bonds as a safe haven in times of economic uncertainty. While rates have stayed pretty stable we haven't seen them come down over the past week even though the bad news would normally have a positive affect on rates.
It is my opinion that bond prices, and thus interest rates, will be trading in a sideways pattern until Congress puts the final touches on the Stimulus package and Wall Street has time to evaluate the impact those funds will have on the economy. Once the stimulus package has been reviewed I believe we will see rates move in one direction or the other.
There is still talk that the Fed will be more active in purchasing mortgage bonds and that could drive rates down a little from where they are, but I believe that the 4.5% rates we saw in early January are in the past and not very likely to reemerge any time soon.
If you are one of the casualties of the mounting job losses I wish you all the best in your search for a new job. For the sake of our country I hope that Congress gets this stimulus package right this time.
Normally bad news translates into improved bond prices as investors move their money into bonds as a safe haven in times of economic uncertainty. While rates have stayed pretty stable we haven't seen them come down over the past week even though the bad news would normally have a positive affect on rates.
It is my opinion that bond prices, and thus interest rates, will be trading in a sideways pattern until Congress puts the final touches on the Stimulus package and Wall Street has time to evaluate the impact those funds will have on the economy. Once the stimulus package has been reviewed I believe we will see rates move in one direction or the other.
There is still talk that the Fed will be more active in purchasing mortgage bonds and that could drive rates down a little from where they are, but I believe that the 4.5% rates we saw in early January are in the past and not very likely to reemerge any time soon.
If you are one of the casualties of the mounting job losses I wish you all the best in your search for a new job. For the sake of our country I hope that Congress gets this stimulus package right this time.
Monday, February 2, 2009
2009...Another disaster? 2/2/2009
I will spend the next few weeks laying out what I see happening in 2009 and how that may compare to the past year to help you make sense of the mess this market seems to be in.
Last year was a pretty bad year for much of the country in home sales and values. Here in Seattle we actually didn't see prices fall as much as most of the country which was great because Seattle also didn't have the big gains in appreciation over the past five years that much of the country experienced. I attribute a pretty solid growth management act for keeping Seattle and Washington from having the big boom/bust that we have seen some other west coast states experience.
This week I am going to give you my thoughts on where prices will head in 2009 and then in future blogs I will hit on areas like interest rates, employment, loan products and the general market. I hope I can put this together in an easy to read layout and not get too much jargon mixed into the message.
Seattle saw home values drop 8.8% in 2008. That sounds terrible, but it was the first real drop we saw compared to many other states who have seen their prices fall the past two years with double digit rates. In fact Seattle had prices appreciate .5% in 2007 compared to Los Angeles' price decine in 2007 and 2008 of 13.7% and 24% respetively. I expect we will see prices come down another 4 to 7% in 2009 and then toward the 3rd or 4th quarter we will have seen the bottom and should swing into 2010 with some positive figures on the home sale/value front. I do expect to see appreciating (gains in home values) return in 2010.
With development almost nonexistent and builders having a difficult time securing loans we should see new construction in Washington/Seattle fall to very low levels. Building permits were down 52% in 2008. This is fine in the short term as there are more distressed home sales in the market now that would compete for buyers. However its not good for the longer term because our population is still projected to grow in Washington and those people are going to need to live somewhere...so someone needs to build them new homes. In economic terms you will see supply (new homes) stay flat and demand (new people buying homes) increase and that in a normal environment will lead to prices going up...but not yet.
Buyers are able to find some 'deals' right now due to home sellers who are either in default, foreclosure, or are worried about heading that direction with job losses that seem to continue to pile up. The employment market should continue to get a little worse before it gets better and that will keep a lid on some of the buying that would otherwise take place. However, with rates being low and the incentives being pushed by the new administration we should see an increase in the number of first time buyers improve this spring and that will free up some owners in the lower price tier to move up to the next tier of home prices.
I see rates playing the most active role in getting buyers to buy. A buyer today who is willing to have a principal and interest payment of $2000 could purchase a home with a loan of 378k at 4.875%. IF that same buyer waited and rates went up to 6% (where rates were last fall) the same $2000 payment would only buy them a loan of $333.5k. So the same payment would buy 88% of the loan amount. If prices fall another 12% that would be about a wash, but I really don't expect prices to fall as much as 12% in 2009.
The Federal Reserve is actively purchasing mortgage bonds to keep interest rates as low as possible because they understand the time value of money and know low interest rates will allow buyers to get a nice home (which is already being sold at a discount) and secure an attractive rate and payment structure going forward.
So my advice to buyers is...don't wait too long for the rock bottom deal because you may likely get a discount on the price and then get hit with a higher rate and it costs the same over time...which means you really didn't get the deal you think you did. Rates are great, there are some great tax benefits being offered to first time buyers, and buyers are finally in the drivers seat...so go buy a house!...oh and by the way...call me to help you with your financing.
Last year was a pretty bad year for much of the country in home sales and values. Here in Seattle we actually didn't see prices fall as much as most of the country which was great because Seattle also didn't have the big gains in appreciation over the past five years that much of the country experienced. I attribute a pretty solid growth management act for keeping Seattle and Washington from having the big boom/bust that we have seen some other west coast states experience.
This week I am going to give you my thoughts on where prices will head in 2009 and then in future blogs I will hit on areas like interest rates, employment, loan products and the general market. I hope I can put this together in an easy to read layout and not get too much jargon mixed into the message.
Seattle saw home values drop 8.8% in 2008. That sounds terrible, but it was the first real drop we saw compared to many other states who have seen their prices fall the past two years with double digit rates. In fact Seattle had prices appreciate .5% in 2007 compared to Los Angeles' price decine in 2007 and 2008 of 13.7% and 24% respetively. I expect we will see prices come down another 4 to 7% in 2009 and then toward the 3rd or 4th quarter we will have seen the bottom and should swing into 2010 with some positive figures on the home sale/value front. I do expect to see appreciating (gains in home values) return in 2010.
With development almost nonexistent and builders having a difficult time securing loans we should see new construction in Washington/Seattle fall to very low levels. Building permits were down 52% in 2008. This is fine in the short term as there are more distressed home sales in the market now that would compete for buyers. However its not good for the longer term because our population is still projected to grow in Washington and those people are going to need to live somewhere...so someone needs to build them new homes. In economic terms you will see supply (new homes) stay flat and demand (new people buying homes) increase and that in a normal environment will lead to prices going up...but not yet.
Buyers are able to find some 'deals' right now due to home sellers who are either in default, foreclosure, or are worried about heading that direction with job losses that seem to continue to pile up. The employment market should continue to get a little worse before it gets better and that will keep a lid on some of the buying that would otherwise take place. However, with rates being low and the incentives being pushed by the new administration we should see an increase in the number of first time buyers improve this spring and that will free up some owners in the lower price tier to move up to the next tier of home prices.
I see rates playing the most active role in getting buyers to buy. A buyer today who is willing to have a principal and interest payment of $2000 could purchase a home with a loan of 378k at 4.875%. IF that same buyer waited and rates went up to 6% (where rates were last fall) the same $2000 payment would only buy them a loan of $333.5k. So the same payment would buy 88% of the loan amount. If prices fall another 12% that would be about a wash, but I really don't expect prices to fall as much as 12% in 2009.
The Federal Reserve is actively purchasing mortgage bonds to keep interest rates as low as possible because they understand the time value of money and know low interest rates will allow buyers to get a nice home (which is already being sold at a discount) and secure an attractive rate and payment structure going forward.
So my advice to buyers is...don't wait too long for the rock bottom deal because you may likely get a discount on the price and then get hit with a higher rate and it costs the same over time...which means you really didn't get the deal you think you did. Rates are great, there are some great tax benefits being offered to first time buyers, and buyers are finally in the drivers seat...so go buy a house!...oh and by the way...call me to help you with your financing.
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