Coming Loan Changes Could Squeeze High Priced Home Markets
By Julie Schmit, USA TODAY
Time is short for some buyers and owners of more expensive homes to get the best terms on mortgage loans.
Starting Oct. 1, Fannie Mae and Freddie Mac will cut the size of loans they buy from lenders. That will force many future borrowers into more expensive and harder-to-get jumbo loans.
The Freddie and Fannie limits, which are generally $417,000 for single-family homes nationwide, were raised in 2008 in some high-cost housing markets to stimulate the economy. In many areas, the limits rose to $729,750 and next month they'll fall to $625,500. Limits will drop more sharply in some areas and less in others.
Major lenders, including Bank of America, Wells Fargo and JPMorgan Chase, have stopped taking new applications for affected loans so that those in process close by the deadline.
Meanwhile, borrowers with offers on homes — who need loans at the current limits — are "panicked to close loans" by the deadline.
Some lenders are "buried" given the rush to close deals before the changes and the mini-refinance boom driven by low rates, says Dean Rizzi of Guarantee Mortgage in San Francisco. He has 10 home buyers who need loans to close before the deadline.
With jumbos, borrowers could see a 4.5% interest rate, for example, go to about 5%. Down payments of 20% will be the norm.
Bank of America says it will close its deals in time. It stopped taking new applications for loans affected by the changes in mid-July, spokesman Terry Francisco says. Borrowers starting the loan process now are probably "out of luck" if they want loan terms based on current limits.
Some buyers may lack needed down payments and others may have to consider less costly homes, says Beth Peerce, president of the California Association of Realtors.
Lobbying efforts to get Congress to extend the higher limits "are not looking great," Peerce says.
Starting Oct. 1, Fannie Mae and Freddie Mac will cut the size of loans they buy from lenders. That will force many future borrowers into more expensive and harder-to-get jumbo loans.
The Freddie and Fannie limits, which are generally $417,000 for single-family homes nationwide, were raised in 2008 in some high-cost housing markets to stimulate the economy. In many areas, the limits rose to $729,750 and next month they'll fall to $625,500. Limits will drop more sharply in some areas and less in others.
Major lenders, including Bank of America, Wells Fargo and JPMorgan Chase, have stopped taking new applications for affected loans so that those in process close by the deadline.
Meanwhile, borrowers with offers on homes — who need loans at the current limits — are "panicked to close loans" by the deadline.
Some lenders are "buried" given the rush to close deals before the changes and the mini-refinance boom driven by low rates, says Dean Rizzi of Guarantee Mortgage in San Francisco. He has 10 home buyers who need loans to close before the deadline.
With jumbos, borrowers could see a 4.5% interest rate, for example, go to about 5%. Down payments of 20% will be the norm.
Bank of America says it will close its deals in time. It stopped taking new applications for loans affected by the changes in mid-July, spokesman Terry Francisco says. Borrowers starting the loan process now are probably "out of luck" if they want loan terms based on current limits.
Some buyers may lack needed down payments and others may have to consider less costly homes, says Beth Peerce, president of the California Association of Realtors.
Lobbying efforts to get Congress to extend the higher limits "are not looking great," Peerce says.
Comments