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Stimulus package agreement reached
- Thread starter MrDODGE
- Start date
Quote from Covertibility:
Looks like Fannie and Freddie got their wish as their conforming loan limit is raised to $625k.
Dropping rates, giving people free money, raising the conforming loan limit, Hope Now or whatver that plan was called, etc... sure does look like a floor in housing is being built.
Not so fast. http://blogs.marketwatch.com/greenberg/
Reality Check on Raising Mortgage Caps
Nobody in a high-housing price state will scoff at raising the cap on government-sponsored loans to $700,000 from $417,000, as is proposed in the economic-stimulus package. If nothing else, that should give psychological relief.
However, checking in with our old friend Mark Hanson, a mortgage banker and the author of the very well read âStraight talk on the mortgage mess from an insiderâ post here, the reality is:
âNew borrowers still have to qualify. Fannie/Freddie is full doc only primarily. Without
âStated Income for wage earners it is tough to qualify for a $650,000 loan.
âIn 2005 to 2007, 70% of all Jumbos were âstated incomeâ for a reason: Ninety percent of all âstated incomeâ borrowers lied about their income to qualify.
âRefiâs will still have trouble due to values dropping in jumbo areas by such a large amount. These are the ones that really need the help.
And the good news, says Mark: âThis will be a positive for those purchase money loans for people that actually make the money and have the down payment.â
To put this in perspective, Mark adds:
For the past several years and husband and wife working at McDonaldâs for a proven two years could borrower 650,000, STATED income no problem. They just put enough money as income listed on the application to qualify. Wall Street banks who ultimately bought the loans did not care. Lenders also qualified at interest-only payment rate with zero to 5% down. Credit scores at 600 were okay.
NOW, you must have earned $135,000 to $150,000 FULLY DOCUMENTED for the past two years and have a current pay stub and average âotherâ debt to borrow $650,000. You must have at least 10% equity or down payment. You must have a credit score of 700 or above. This is not a large number of the population.
Without Stated Income for WAGE EARNERS, how much will this raise really matter? From 2005-2007 70% of all jumbo loans were Stated Incomeâ¦and for a reason: Ninety percent of all Stated Income borrowers lied about their income to qualify. Fifty percent by more than 5% and 50% by more than 50%.
This loan limit raise definitely will not help all the lenders with all the old vintage trash loans on their books.
This should help some people with large incomes buy homes. That is about it.
Thanks, Mark.
Quote from daddyeaux:
why the f am I subsidizing somebody who qualifies for $625K house?
People will be able to refinance and will have a lot more money to spend in the economy now.
I still think they need a major recession/correction to clear out all the problems once and for all but I am just a guy on the internet.
Quote from daddyeaux:
oh well shit, $730K now.....
The point of the article is that upping the GSE limit on conforming loans does nothing to stimulate housing demand (particularly in California). The only way to reinflate (and stop the present deflation of housing) is to bring back liar loans and toxic mortgages. Now that we are back to traditional lending standards, this cap increase only benefits buyers in the higher end market that actually HAVE the income to support the mortgage.
RT