The latest legislation with a good HUD website for loan amounts & geographic areas

February 4th, 2008 · No Comments


posted by Rob Chrisman:

Father O’Malley answers the phone.

“Hello, is this Father O’Malley?”
“It is!”
“This is the IRS. Can you help us?”
“I can!”
“Do you know a Ted Houlihan?”
“I do!”
“Is he a member of your congregation?”
“He is!”
“Did he donate $10,000 to the church?”
“He will!”

  • Homebuilder Beazer Homes of Atlanta announced that it will no longer originate mortgages and will offer its buyers mortgage services through Countrywide Financial Corp. They also stated that Beazer will stop building homes in several communities, mortgage originations will end immediately, and end a related mortgage services relationship with Homebuilders Financial Network, LLC.
  • HSBC is no longer accepting 15 day and 30 day locks – their 30 day lock will be priced the same as their 60 day locks. In addition, they would like all previous 30 day locked loans submitted to underwriting within 15 days of when the loan was locked. HSBC is offering free extensions due to their own backlog as long as they have the file within the 15 days, otherwise it will cost brokers .125.

The latest I’d heard on the pending legislation: everyone is waiting on the Senate and House Banking leadership to resolve the contested items … the FHA mortgage limit increase will not be permanent and also that the House version of the FHA bill is not part of the stimulus package. The stimulus bill goes to the Senate for consideration and while there is tremendous pressure to move quickly on the legislation because of market conditions, there have already been proposals floated by several Senators that could delay passage of the bill. With respect to the mortgage limit issue, for example, some senators may want to lower the maximum loan amount to $625,000. Implementation of the new calculation formula (changing the amount from 95% to 125% of an area’s median sales price) can also occur quickly. Be sure to read for relevant geographic area, median home price, and calculation information.

Will the new mortgages, with the new loan amounts, be put into normal FNMA & FHLMC securities (TBA’s, or “to-be-announced’)? Currently, the majority of participants expect that these agency-eligible jumbos will not be TBA eligible, which could lead to rate & pricing issues. Additionally, market participants have questioned whether the agencies will charge a special guarantee fee for jumbos or whether they will maintain the fee that was added for conforming loans a few months ago. There are initial start-up costs for the GSEs (Government Sponsored Enterprises, FNMA & FHLMC) in order to enable their systems to process these new loans. Given the temporary nature of the plan, these upfront costs may make it more expensive for the GSEs to process these loans, and this would be passed on to borrowers. Given that the majority of outstanding jumbo loans are owned by banks, many have suggested making these loans agency eligible (allow FNMA & FHLMC to buy them) would free up balance sheet and much needed capital for these banks, a nice benefit! Analysts estimate that of the $2.7 trillion jumbo mortgages outstanding, roughly $200 billion of existing jumbo MBS and another $200 to $300 billion of whole jumbo loans currently held on bank balance sheets would be eligible for refinancing through the agency loan programs. These estimates, however, depend heavily upon how much the conforming loan limit is raised.

Back to the market! On Friday we had a weak employment report, leading to some lower rates. It was relatively quiet over the weekend, and could be a quiet week as there is little economic data of importance. Today brings the December Factory Orders report expected +2.0% (similar to last week’s Durable Goods number, but this includes orders for both durable & non-durable goods), tomorrow we will get Jan ISM manufacturing index, Thursday the usual initial unemployment claims.  A variety of speaking engagements by Fed officials and a few Treasury auctions (10-year Notes on Wednesday and the 30-year Bonds Thursday) round out the week. It is typical to see a little weakness in bonds ahead of these sales as investors prepare for them. Speaking of the 10-yr, it stands at 3.65% and mortgage prices are worse by roughly .125 versus Friday afternoon.

Tags: Commentary · GSEs · Mortgage Market

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