This article was sent to me today by one of our local government loan program experts - Wendy Mueller - an awesome Mortgage Broker with Platinum Home Mortgage (Formerly Pinnacle Financial). She is probably the most knowledgeable person I've met concerning government home loan programs. The fact that she is still busy helping people while 1/3 of her competitors have gone out of business this last year says something about her abilities also. By the way, Wendy is one of my company's competitors - I still listen to her.
Mark Thorngren
http://www.markthorngren.com
Hello, please read below, with all the great changes that are coming we need to be prepared as this is not only going to help buyers become home owners it will also ease up some of the jumbo market. Don’t forget that FHA can be combined with CALHFA for an extra down payment assistance benefit.
I. Stimulus Bill: FHA and GSE Mortgage Limit Increases
We are increasingly confident that the Senate will pass the stimulus package this week. The timing of the President’s signing of the bill will depend on whether the Senate passes any amendments to the stimulus bill. There are no amendments expected on the mortgage limits. If the Senate passes amendments to the tax incentive portion of the bill, it will require the House and Senate to have a conference before the final bill can then be passed by Houses of Congress and be sent to the President for signature.
A. Timing of the legislation
We expect the stimulus bill to be passed by the Presidents’ Day recess on February 15th. It could happen sooner if the Senate passes the stimulus bill without any amendments this week. We would expect the President to sign the bill almost immediately after passage (within a couple of days after passage by the Congress if not sooner).
B. Content of the legislation
The mortgage limit provisions should remain intact. An amendment might be proposed to lower the FHA maximum amount but we would be very surprised if it passed. See our email from last week for additional details about the provisions.
As we have discussed, the legislation proposes four temporary changes for FHA:
· Raises the base loan limit (“floor”) to 65% of the current GSE limit ($417,000) = $271,050
· Raises the maximum FHA loan limit from $362,750 to $729,750 (175% of the GSE base limit - $417,000
· Increases the calculation factor from 95% to 125% of area median sales price for determining “high cost” areas
Attached is a chart demonstrating the impact of this change in a portion of the metro areas around the country. As a reminder for any area w/ a current FHA limit above $206,000, the area will benefit from this change.
Calculation Process
Take the current mortgage limit and 1) divide the limit by .95 to determine the median sales price and then multiply the median sales price by 1.25 to determine the new FHA limit.
· Implements Fannie Mae/Freddie Mac ratios for calculating maximum loan amounts for two-, three- and four-family units in all of the above categories
Fannie Mae and Freddie Mac two-,three- and four family unit properties increase the same percentage that the single family limit increases. In 2006. the GSE single family limit increased 15.95% and the mortgage limits for multiple units increased 15.95%.
This change should result in a significant increase in FHA limits for multi-unit properties. In the past, FHA used fixed percentages of the single family limit (i.e. 107% of single family for two family unit, 130% for three-family unit and 150% for four-family units). For example, under the new provision, if the single family limit increases slightly over 100% in a “high cost area” (from $362,790 to $729,750), we would assume the multiple unit amounts would increase the same percentage (slightly over 100%).
C. Implementation schedule
The bill requires HUD to publish the new mortgage limits and data on area median sales prices in 30 days from enactment. However, since Mortgagee Letter 2008-2 was published on January 18, 2008, FHA should be ready to publish limits the day the President signs the bill. Regardless, the new “floor” and areas w/ mortgage limits below the current FHA maximum limit ($362,750) can be determined from available data as we did in the attached document.
We believe it is appropriate to start preparing for the mortgage limit increases as we have outlined above (i.e. training, materials, etc.)
Fannie Mae & Freddie Mac
The bill states that the GSE limits should follow the HUD process. Accordingly, the major difference is Fannie Mae and Freddie Mac will have a higher “floor” ($417,000). While the statute appears clear and unambiguous that the GSEs should use HUD data for this process, it is important to remember that the GSEs have a regulator (OFHEO) that could play a role in the implementation process that could delay usage. However, because of the significance of the issue, we expect implementation will occur expeditiously barring some unforeseen issue.
II. FHA Modernization Bill
We now expect the FHA bill will be enacted in February and possibly by February 15th. We understand that negotiations are underway on the contested items. We are uncertain as to how the issues will be resolved. It is expected that the Senate requirement for minimum cash investment of 1.5% will be adopted.
Thank You
You’re First Time Home Buyer Expert
Wendy Mueller
Platinum Home Mortgage
(Formerly Pinnacle Financial)
(805) 907-3136 Cell
Platinum Home Mortgage Corporation and its affiliates do not represent, warrant or guarantee that the integrity of this communication has been maintained or that the communication is free of errors, viruses or interference. Platinum Home Mortgage Corporation. C 2007 All rights reserved. Equal Housing Lender.Platinum Home Mortgage Corporation 2200 Hicks Rd, Suite 101 Rolling Meadows IL 60008
