By Alicia Lanier, REALTOR
Unfortunately for Silicon Valley home buyers, there will be no change in 2008 for the $417,000 maximum on home loans that can be bought or guaranteed by Fannie Mae and Freddie Mac. And, the Office of Federal Housing Enterprise Oversight (OFHEO) hinted in its announcement that, if home prices nationwide continue to decline next year, the conforming loan limit might even be lowered in 2009.
This decision carries a hefty price tag for California home buyers. Home loans over $417,000 – called non-conforming or jumbo loans – typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting purchasing power for households in California. Do I need to say that affordability is already beyond the reach of many of our first-time home buyers, especially here in our pricey Valley?
The president of the California Association of Realtors (CAR), William E. Brown, was quick to respond. “At more than $568,000, the median price of a home in California is more than 2.5 times the U.S. median of $221,000, yet California is not recognized by OFHEO as a high-cost state,” said Brown. “California still has the third highest home price in the nation, compared with Hawaii at seventh, and Alaska, which ranks 39th in terms of median home price. Yet Alaska, Hawaii, Guam, and the U.S. Virgin Islands are recognized by OFHEO as high-cost areas.”
Brown added: “Now is the time for the U.S. Senate to pass legislation allowing regional adjustments to Fannie Mae and Freddie Mac loan limits and to modernize FHA loan programs. This critical legislation is a key step to allowing families in California an opportunity to climb the first rung of the homeownership ladder.”
Alicia Lanier is a REALTOR and member of the Coldwell Banker Diamond Society – Top 8% of Agents Internationally www.AliciaLanier.com 408-491-1634
The following was received today from Senator Barbara Boxer in response to my e-mail to her asking her to support a Senate bill that would increase loan limits discussed in my blogpost:
“Dear Ms. Lanier:
Thank you for writing to me about reforming the Federal Housing Authority (FHA). I appreciate hearing from you.
As you may know, the Federal Housing Authority (FHA) guarantees qualified loans against default so that banks or other private lenders can offer loans with lower down payments and lower interest rates. Unfortunately, due to legislative caps on the size of those loans, FHA-insured loans have become unavailable to Americans who live in areas with high housing costs.
I am pleased to announce that Congress is working to solve this problem. H.R.1852, the Expanding American Homeownership Act would increase FHA loan limits to 125% of the median home price for high-cost areas and allow the Department of Housing and Urban Development (HUD) to increase that limit by up to $100,0000 based on market conditions or the prices in that area. These increases, along with other changes, would allow many Californians to take advantage of the lower interest rates on loans that meet the standards set by the FHA and open a door to refinancing opportunities for many borrowers currently facing potential foreclosure.
Additionally, H.R.1852 would enable the FHA to use a more flexible risk-based premium pricing structure that would allow the FHA to better serve zero-and-lower-downpayment borrowers, or borrowers with low credit scores.
In addition, H.R.1852 adds new borrower protections, such as increased disclosures and mandatory foreclosure prevention counseling. It also would inflict civil penalties on any party attempting to influence a home appraisal, ensuring that the appraisal process remains fair and unbiased.
I am pleased to report that H.R. 1852 passed the House on September 18, 2007. The Senate Committee on Banking, Housing and Urban Affairs has approved a similar bill, the FHA Modernization Act of 2007 (S.2338), which will be taken up for consideration by the full Senate. While this bill makes important changes to the FHA, it does not increase the loan limits as high as in the House version.
Rest assured I support the goals of H.R.1852 and will fight to see that the higher loan limits are included in either the final Senate version or any bill that comes out of Conference.
Again thank you for writing to me.
Barbara Boxer
United States Senator
Please visit my website at http://boxer.senate.gov “