Monday, November 7, 2011

Irvine Housing Blog

Irvine Housing Blog

Link to Irvine Housing Blog

Government-backed loan limits may go back up

Posted: 07 Nov 2011 02:30 AM PST

The Senate passed a measure that would increase the loan limits on federally guranteed loans back to $729,750. Now it's up to the House of Representatives to decide.

Irvine Home Address ... 50 EAGLE Pt Irvine, CA 92604
Resale Home Price ......  $285,000


A circumstance beyond our control, oh oh oh oh
The phone, the tv and the news of the world
Got in the house like a pigeon from hell, oh oh oh oh
Threw sand in our eyes and descended like flies
Put us back on the train
Oh, back on the chain gang

Pretenders -- Back on the Chain Gang

Every time politicians do the right thing and allow the housing market to wean itself off subsidies, pressures from loan owners prompts them to change their minds. We're being put back on the train leading to temporary market supports which merely delay the recovery.

In the latest dumb move from Washington, the Senate passed a bill which would raise the federally guaranteed loan limits back to $729,750. Apparently, private money is too expensive and somewhat risk adverse -- as they should be -- so lenders and loan owners are turning to the government to assume this risk and pay for the inevitable losses. 

Right now, it's up to the House of Representatives to decide if they want to act on the Senate bill. It faces an uphill battle in the Republican House -- thankfully. I suspect it will not pass.

Donovan on Loan Limits: Let’s ‘See What the House Decides’

By Alan Zibel -- November 2, 2011, 4:03 PM ET

When it comes to dealing with Congress, the White House’s latest slogan is, “We can’t wait.”

But when it comes to lifting federal mortgage caps, the message seems to be, “You decide.”

Back in February, the Obama administration called for a decline in the maximum size of government-backed home loans as a way to start drawing back federal support for the nation’s mortgage market. They dropped on schedule on Oct. 1 but now a movement is afoot to revive the higher limits to support the ailing housing market.

Obama showed the courage to do the right thing despite pressures from the extreme left. He lacks the courage to say no to this bill, and he is hoping the Republicans in the House will kill it and take the heat for him.

Housing and Urban Development Secretary Shaun Donovan said in an interview Wednesday that while administration officials want to reduce the government’s support of the housing market “in the long run,” they also understand the need to support a weak part of the economy.

I wish I understood the need to support a weak part of the economy. It makes no sense to me at all. The housing market will support itself once prices find their natural bottom and the toxic debt is replaces with stable loans with much smaller balances and payments.

“We have to make sure that we’re taking these steps in concert with what’s happening in the market and ensuring that we’re supporting recovery,” in housing, Donovan said. “Obviously that’s the debate that Congress is having… Honestly, we’ll have to see what the House decides. We haven’t weighed in on it…I don’t think this changes the long-term view that we have” about reducing government support for housing.

Obama is trying to steer clear of this issue to avoid angering his left-wing base, but he clearly does not want to see this loan limit raised again, or he would openly support this measure.

Lobbyists for real-estate agents and other housing and mortgage industry groups are pushing on Capitol Hill to restore higher limits on the maximum size of home mortgages that can be guaranteed by Fannie Mae, Freddie Mac and the Federal Housing Administration.

They argue that the housing market is too weak for the U.S. government to withdraw its support for more expensive loans. The loan limits fell to $625,500 on Oct. 1 in expensive markets such as New York and San Francisco from $729,750. A spending bill passed by the Senate earlier this week would lift those limits until the end of 2013.

The NAr is wining and dining politicians to restore supports which they incorrectly believe are good for their incomes. Realtors would be much better served by allowing the market to clear. Transaction volumes would rise, and despite the lower prices, realtors would generate more commissions and make more money. They are arguing against what is in their own best interest, but they are too ignorant eo see it.

In the House, the issue of raising loan limits has emerged as a point of contention among Republicans, and one that puts House Speaker John Boehner (R., Ohio) in an awkward position.

Mr. Boehner is under conflicting pressures on the issue. Republicans in high-cost areas such as California and New York want to lift the limits. Others such as Rep. Scott Garrett (R., N.J.) and Rep. Jeb Hensarling (R., Texas) argue that raising the loan limits is equivalent to endorsing the unpopular and expensive bailout of Fannie Mae and Freddie Mac.

Any increase in the conforming limit will increase the losses at the GSEs and will serve as a bailout to the banks. When the conforming limit was high, banks could offload their toxic crap through purchase or refinance to the GSEs. Once the conforming limit dropped, banks were stuck with their remaining bad loans.

In February, the administration endorsed allowing the loan limits expire on schedule. And at an event in June, Bob Ryan, a top HUD housing policy adviser, said allowing the loan limits to drop would be a “reasonably modest pullback.”

However, the housing market and the broader economy are in a weaker state than economists expected at the start of the year.

Noted housing-market experts such as Ivy Zelman, chief executive of Zelman & Associates, and Mark Zandi, chief economist of Moody’s Analytics, have said it was a mistake to let the limits drop.

Lawmakers adopted the higher limits in 2008 after private lenders pulled back from making “jumbo” loans, which are loans above the federal mortgage caps.

I haven't read where Ivy Zelman said dropping the conforming limit was a mistake. It clearly was not a mistake. It quite predictably lowered high end prices and contributed to the ongoing weakness in the housing market. What people fail to recognize is that this price correction is a necessary and health-restoring process the market must go through.

Larry Roberts and Shevy Akason are hosting an OC housing market presentation at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618) on November 9, 2011. Please RSVP at Register online here: OC Housing Market - Intercap Lending.

2002 rollback

The asking price of today's featured proeprty is just above its 2002 purchase price. When commissions and negotiating room is factored in, this will be a 2002 rollback.

  • The owner paid $270,000 on 9/26/2002 using a $216,000 first mortgage and a $54,000 down payment. She went Ponzi shortly thereafter.
  • On 6/16/2003 she borrowed $221,000 with a new first mortgage.
  • On 5/9/2005 she obtained a $105,000 stand-alone second.
  • On 1/13/2006 she finished with a $200,000 HELOC.
  • Total property debt is $421,000.
  • Total mortgage equity withdrawal is $$205,000. She nearly doubled her mortgage debt in three and one-half years.

All the Ponzis will be flushed from the system before the crash is over. Each of them crossed the Ponzi threshold and became dependant upon mortgage equity withdrawal to make ends meet. Now that lenders aren't giving out free money, these loan owners cannot make ends meet and cannot afford their houses.

This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707 

Irvine House Address ...  50 EAGLE Pt Irvine, CA 92604
Resale House Price ......  $285,000

Beds:  3
Baths:  2
Sq. Ft.:  1135
Property Type: Residential, Condominium
Style: Two Level, Contemporary
Year Built:  1978
Community:  Woodbridge
County:  Orange
MLS#:  Y1106555
Source:  SoCalMLS
Status:  Active
On Redfin:  2 days
Proprietary IHB commentary and analysis 

Resale Home Price ......  $285,000
House Purchase Price … $270,000
House Purchase Date .... 9/26/2002

Net Gain (Loss) .......... ($2,100)
Percent Change .......... -0.8%
Annual Appreciation … 0.6%

Cost of Home Ownership
$285,000 .......... Asking Price
$9,975 .......... 3.5% Down FHA Financing
4.18% ............... Mortgage Interest Rate
$275,025 .......... 30-Year Mortgage
$90,633 .......... Income Requirement 

$1,342 .......... Monthly Mortgage Payment 
$247 .......... Property Tax (@1.04%)
$0 .......... Special Taxes and Levies (Mello Roos)
$59 .......... Homeowners Insurance (@ 0.25%)
$316 .......... Private Mortgage Insurance
$377 .......... Homeowners Association Fees
$2,341 .......... Monthly Cash Outlays

-$211 .......... Tax Savings (% of Interest and Property Tax)
-$384 .......... Equity Hidden in Payment (Amortization)
$15 .......... Lost Income to Down Payment (net of taxes)
$56 .......... Maintenance and Replacement Reserves
$1,817 .......... Monthly Cost of Ownership 

Cash Acquisition Demands
$2,850 .......... Furnishing and Move In @1%
$2,850 .......... Closing Costs @1%
$2,750 ............ Interest Points @1% of Loan
$9,975 .......... Down Payment
$18,425 .......... Total Cash Costs
$27,800 ............ Emergency Cash Reserves
$46,225 .......... Total Savings Needed

Larry Roberts is hosting a Las Vegas cashflow properties presentation at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618) on November 9, 2011. Please RSVP at Register online here: Las Vegas cashflow property - Intercap Lending.

real estate home sales


Post a Comment

Copyright 2009 House Estate World