A plan to lower the cap on federally
backed mortgages may hit home buyers particularly hard in several pockets of
the country. Here in California especially Orange County (my home town) high cost mortgages are the norm, home buyers
might be squeezed out because our government wants to get out of funding the
$
417000 – to $625500 loan amounts. High balance mortgages will go away?
The Federal Housing Finance Agency
plans to reduce the maximum size of mortgages backed by Fannie Mae and Freddie
Mac this January 2014. The current limits are $417,000 in most parts of the
country and up to $625,500 in more expensive markets. The agency hasn't
announced how much it will lower loan caps, but data compiled for Market Watch
by Lender Processing Services, a mortgage-data tracking firm, shows that a
decline of just $25,000 from the current caps would impact hundreds of
thousands of home buyers in middle-priced and upper-middle-priced housing
markets — areas that are relatively upscale but far from the most expensive.
In total, more than 214,000 of the agency-backed mortgages originated last year
were within $25,000 of the current caps, according to LPS. For the first six
months of this year, the number was just over 95,000. By one measure, they’re
most in demand in Cook County, Ill., where 10,510 mortgages originated in 2012
and 4,137 during the first six months of this year were within $25,000 of
current cap levels — the highest number in any county nationwide, according to
LPS. In contrast, Manhattan, which has some of the most expensive real estate
in the country, had just 1,187 and 460 of such large loans, respectively, for
each time frame.
Nationally, these loans
have accounted for less than 3% of all Fannie Mae and Freddie Mac mortgages
given to borrowers during this time, though the share is much higher in some
regions. In Colorado, North Carolina and South Carolina as well as in the
District of Columbia, they account for more than 5% of agency mortgages that
borrowers signed up for last year. They had over a 10% share in three Colorado
counties, Boulder, Denver and Gunnison, during the first half of this year.
A greater number of borrowers could
be impacted if mortgage caps drop by a larger amount. Housing experts say a
$25,000 drop is likely conservative, and if the real cut is bigger, more
borrowers will be left with fewer mortgage options going forward.
There is an attitude of “let them
eat cake.” In areas where the median priced home is $ 200000. Americans might
feel that our government should not be spending tax dollars on helping luxury
home buyers. The problem with this logic is for example in most of Orange
County California there are little to no single family homes available for $500000.
Putting a ceiling on all government funded loans at $417000 is going to squeeze
entry level homeowners out of areas where there are high paying jobs.
Next year our industry will be hit
with the Qualified Mortgage requirements (which means fewer borrowers will
qualify) layered with lower loan limits and higher borrowing costs. Not great
news for buyers and sellers, especially in Southern Californian where housing
costs are among the highest in the nation. Right now may be the best time to
sell or buy a home. You can always count on that next year things may be
different.
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| Watermelon mint grapefruit salad |
As summer comes to an end- a simple fast dinner salad. Purchase one of those smaller watermelons, since we are going on a smaller size in general... A pink grapefruit, small red onion, and fresh mint (come on over it grows like a weed in my garden). Slice thin. You can drizzle your favorite savory dressing or just a splash of vinegar and oil, salt and pepper.