Thursday, March 06, 2008
FHA boosts Inland loan limits to aid distressed homeowners
By LESLIE BERKMANThe Press-Enterprise
In a move to help people buy homes and refinance out of unaffordable mortgages, the Federal Housing Administration raised the limits for one year on FHA-insured mortgages.
The ceiling for Riverside and San Bernardino counties climbs to $500,000 from the previous $362,790.
The announcement was a pleasant surprise to many mortgage brokers, who had expected Inland Southern California to receive a much smaller benefit from the new ceilings. Based on median home prices across the nation, the new ceilings vary county by county.
The adjustments, part of the economic stimulus package, make federally backed mortgages accessible to more buyers.
Housing and mortgage experts said that while the new availability of FHA mortgages will not cure the housing crisis, it is a step in the right direction. There is also legislation proposed to make the increased limits permanent.
It will not, however, help a homeowners who owe more than their houses are worth.
The mortgage ceilings for California counties were announced early by Housing and Urban Development Secretary Alphonzo Jackson, who was in Anaheim for a foreclosure forum.
"It is amazing to me," said Will Herring, government affairs chairman for the Inland Empire chapter of California Association of Mortgage Brokers, referring to the new $500,000 mortgage limit.
When the bipartisan economic stimulus bill stipulated that the new ceilings would be calculated at 125 percent of the median home price, it worried local real estate and mortgage officials. They did not expect the change to provide the Inland region much relief because Riverside and San Bernardino counties have experienced sharply falling real estate values in recent months.
John Marcell, a California Association of Mortgage Brokers official who lobbied to have the FHA ceiling raised, said the Inland median price reflects an effort to minimize the impact of a burst of distress home sales by homeowners unable to afford their mortgages and by lenders. These sellers have been willing to accept "fire sale" prices, he said.
FHA set the median home price in Riverside County at $400,000, which is higher than the $331,500 that DataQuick Information Systems reported as the median price for homes sold in the county in January. DataQuick put San Bernardino County's median price for January sales at $298,000.
Herring said he and other mortgage professionals had figured that based on the region's median home price, the Inland area's new FHA ceiling would be no higher than $429,000.
FHA spokesman Lemar Woolsey said he did not know why the ceiling for the region was so unexpectedly high. The federal agency previously said it would determine the median home price in the Riverside/San Bernardino area by using the median price of the county with the most expensive housing, which is Riverside County. For both counties, the new mortgage limit is $500,000.
3 Percent Down Payment
FHA-insured mortgages require a 3 percent down payment compared with one of as much as 20 percent required on other loans. Lenders, having tightened their guidelines, increasingly demand that 20 percent.
In addition, FHA allows that down payment to be a gift to the borrower from a relative, an employer or a nonprofit group. It also allows multiple co-borrowers, none of whom has to live in the house being purchased or refinanced.
FHA borrowers can carry more debt and qualify with lower credit scores than private insurers typically allow. However, FHA does require borrowers to document that they can afford the house they are buying or refinancing -- something that was not required by riskier mortgage products that have since been discontinued.
"This is huge for us," predicted Carlee Rickabaugh, sales manager for John Laing Homes Inland Division. She said while FHA mortgages already are important in selling the builder's townhouses, they will now also help sell its single-family homes, which cost more than the previous FHA ceiling.
Herring, the official for the California Association of Mortgage Brokers' Inland chapter, said it is widely expected that the same higher FHA ceilings will be applied to Fannie Mae and Freddie Mac mortgages.
The two government-sponsored companies, which buy mortgages, are scheduled to announce new mortgage ceilings today.
If the current $417,000 ceiling for Fannie Mae and Freddie Mac mortgages is raised to $500,000, more people will be able to refinance out of so-called "jumbo" adjustable-rate mortgages into mortgages with a lower fixed interest rate.
On Wednesday, the standard Fannie Mae mortgage with no points had a 6 percent interest rate, Herring said, while loans that exceed the $417,000 ceiling had a 7 percent interest rate. On a $500,000 mortgage, a borrower able to convert to a Fannie Mae mortgage would save about $381 on the monthly mortgage payment, he said.
Not for Everyone
However, Herring cautioned that the new ceiling will not help the many families who owe more money on their house than it is worth and will not be able to refinance with FHA, Fannie Mae or Freddie Mac.
"Everyone who wants to refinance cannot refinance because they are upside down," he said. "Every little bit helps, but it is not going to clear up the issues overhanging the housing and mortgage markets," said Greg McBride, senior financial analyst at Bankrate.com, a consumer finance Web site.
McBride said one obstacle is that houses are still too expensive for many first-time buyers.
And refinancing is not an option for people who don't earn enough to stay in their homes, he said, adding, "... The only way they can afford the payments is if you made the payments for them."Labels: Corona, Foreclosure, Home Prices, Inland Empire, Loan Modification, Moreno Valley, Murrieta, Real Estate, Riverside, Short Sales, Statistics, Temecula
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