There are more changes coming to the residential lending world (all those surprised by that, please stand on your head and whistle). The Fed is maintaining the conforming loan limit of $417,000, but is lowering the non-conforming, conforming loan limits. The what now? A little background might help: in 2008 Fannie Mae’s charter was expanded to allow loan amounts in high cost areas (such as San Diego… yeah us!) to exceed the nationwide conforming loan limit of $417,000. The most recent loan limit in San Diego County has been $697,500, thus making it exceedingly difficult for those of us who toil away in the real estate salt mines of America’s Finest City to keep beautiful San Diegans housed in the luxury to which they have become accustomed…
But as of October 1, the limit is dropping; in San Diego County it will be $546,250 and some wonder if this isn’t just a stepping stone on the way down to the original $417,000!
As you might imagine, there is a long list of people who do not like this decision. The National Association of Realtors has sent out an Emergency “Call for Action” message in response, suggesting “… a housing recovery depends on keeping mortgages affordable” and warning this decrease in loan limits will “make creditworthy borrowers unable to access affordable financing” (emphasis mine). This raises an interesting question:
Should the government be providing affordable financing in high cost areas?
Hold on, let me ask that again, with a little more accuracy:
Should you and I be subsidizing mortgages for people buying $800,000 homes?
Wait… don’t answer that. We don’t want to be insensitive to the needs of my fellow San Diegans and we certainly don’t want to interfere with the ongoing success of the “housing recovery.” Let’s move on to the good news:
With the Fed in charge of “high cost” loans and a market unsure what the Fed might do next… well, they were kind of the elephant in the room; there was no space for anyone else, which meant that until very recently, there were no true Jumbo loans to be found. (Unlike jumbo shrimp, a jumbo loan actually means what it sets out to mean: a loan amount larger than Fannie Mae’s conforming – or in this case non-conforming, Read more