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Both Freddie Mac and Fannie Mae are temporarily suspending all scheduled evictions involving foreclosed occupied single-family 1- to 4- unit residences with owned mortgages beginning December 19, 2011 through January 2, 2012.

The suspension will apply only to eviction lockouts related to Freddie Ma and Fannie Mae owned REO properties and will not affect other pre- or post-foreclosure processes. During this period, legal and administrative proceedings for evictions may continue, but families living in foreclosed properties will be permitted to remain in the home.

Congress passed and President Obama signed into law on November 18 a bill to reinstate the Federal Housing Administration (FHA) loan limit in high-cost areas through 2013. In Santa Clara County, this would mean the maximum size of mortgages FHA can insure will be raised back up to $729,750.

The higher Fannie Mae, Freddie Mac, and FHA conforming loan limits of $729,750 expired September 30 and were subsequently reduced to $625,500. Loan limits for loans backed by Fannie Mae and Freddie Mac were not increased and remain at the reduced level.

The Silicon Valley Association of REALTORS® and its state and national partner associations have long advocated for Congress to reinstate all the loan limits permanently. “We are pleased that Congress agreed to reinstate the FHA loan limits, though we are disappointed that our lawmakers did not reinstate the higher loan limits for Fannie Mae and Freddie Mac backed loans, as well,” said Gene Lentz, president of the Silicon Valley Association of REALTORS®. “The reinstated FHA loan limits will allow qualified, creditworthy borrowers access to affordable mortgage financing.”

FHA provides mortgage insurance to borrowers without enough of a down payment to qualify for prime loans. With an FHA loan, home buyers can put down as little as 3.5 percent on a mortgage loan.

The REALTORS® believe continued a government role in housing financing will ensure stability in mortgage markets and enable home buyers in high-cost areas to refinance and obtain financing for new home purchases more easily. The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.

The GSEs and FHA currently back 90 percent of new home loans. The Obama administration and some lawmakers want to reduce government’s role in the mortgage business and have said the lowering of loan limits is a first step to prompting private capital to return to the market.

In addition to extending the FHA-insured mortgages, the new law provides for a short-term extension of the National Flood Insurance Program (NFIP) through Dec. 16, 2011.  REALTORS® want to ensure that millions of home and business owners across the country have access to affordable flood insurance and had strongly urged Congress to work on a five-year NFIP reauthorization bill to provide certainty and avoid further disruption to real estate markets.

Pictured left to right are past C.A.R. President Jim Hamilton, SILVAR President-elect Suzanne Yost, Los Gatos/Saratoga District Chair Doug Evans, C.A.R. Vice President and Chief Economist Leslie Appleton-Young, SILVAR President Gene Lentz, and Los Gatos/Saratoga District Co-chair Chris Rasmussen.

California Association of REALTORS® Vice President and Chief Economist Leslie Appleton-Young told SILVAR members at last Wednesday’s Los Gatos/Saratoga District tour meeting that while the worst is over, the market continues to struggle with not much relief in sight.

“The tide has turned for housing, but now it’s stuck,” said Appleton-Young.

C.A.R.’s chief economist explained that the economy started to gain a bit of traction and seemed to be moving forward at the beginning of this year, but things happened one after another – Japan’s earthquake and tsunami, oil price spikes, uprisings in the Middle East, stock market volatility, the U.S. debt and the debt crisis in the euro zone. As a result, the housing market that appeared to be recovering is now stalled.

Lenders aren’t lending and consumer and entrepreneurial confidence continue to be low. As long as the jobs problem continues, she doesn’t expect consumer spending to improve by much. Mortgage rates have experienced a historical drop, “but you can’t push on a string. You can’t make people borrow; you can’t make lenders lend,” she said.

The good news is Santa Clara County is doing better than most parts of the state with just a 9.6 unemployment rate. In Santa Clara County, 35 percent of homes that closed escrow in September were distressed, but this is a far cry from places like Solano County, where in September 73 percent of homes that closed escrow in September were distressed sales.

The Bay Area has the best economy in California, in terms of income and job growth. “Companies in this valley are in the cutting edge, leading growth in the economy,” said Appleton-Young.

September single-family home sales were at 487,940 units. Absent more wild cards that could upset the economy, C.A.R. expects 491,000 unit sales by year-end and 496,000 unit sales in 2012, just a 1 percent increase from this year. California’s median price was $287,440 in September, down 8.3 percent from September 2010, but way above from when it bottomed in February 2009 at $245,230. C.A.R. expects the median price to hit $291,000 by the end of 2011 and to increase 1.7 percent to $296,000 in 2012.

Troubles are ahead because all levels of government will have to wrestle with issues of pensions and cost of health and other benefits for public employees. Appleton-Young said ultimately, everyone will have to answer for the deficit.

“It’s hard to do when in some places, the coffers are empty. You can’t spend more than you take in, even if you are the U.S. government. Everyone is going to have to give up something in the end,” she said.

Appleton-Young said in 2012, REALTORS® will need to watch the following federal issues closely – the future of Fannie Mae and Freddie Mac, changes in the tax treatment of real estate, including the definition of the QRM (Qualified Residential Mortgage), which could mean purchasing a home will be even more difficult and costly for consumers.

The restoration of the FHA loan limits is vital to both home ownership and our economy. On October 1 the mortgage loan limits declined in 669 counties in 42 states. This immediately reduced mortgage liquidity and home buyers’ ability to obtain a mortgage. The House and Senate are now deciding whether or not to restore the loan limits. The restoration of the loan limits to their prior levels has been included in an Appropriations bill being deliberated by Congress this week.

Your Senator is a member of the group of Congressional leaders who will decide whether Congress will restore the loan limits. This is why they need to hear from you today.

Why is this so important? Without the restoration of the loan limits the availability of safe, affordable, reliable mortgage financing will continue to diminish. If this happens, many potential home buyers run the risk of being priced out of the American Dream of home ownership. Even worse, this could hold back the housing recovery.

In the Silicon Valley region, the conforming loan limits of $729,750 were reduced by $104,250. This means buyers who need mortgages for more than $625,500 are now forced into the jumbo market, which means they would be paying higher interest rates, or unable to buy a home.

The California Association of REALTORS® (C.A.R.) estimates more than 30,000 California families now face higher down payments, higher mortgage rates, and stricter loan qualification requirements with conforming loan limits on mortgages backed by FHA, Fannie Mae, and Freddie Mac now reduced. In Santa Clara County, C.A.R. estimates nearly 8 percent of potential home sales would be rendered ineligible under the lower GSE loan limit, and 12.2 percent would be deemed ineligible under the lower FHA limit. 

“The loan limits provision is fully paid for, and won’t cost taxpayers a dime. If families cannot obtain financing to buy, home prices will continue to fall. This will further erode the wealth of families in our community and across the country, and will prolong the nation’s economic recovery,” said Lentz. “As individuals and families everywhere are trying to gain a foothold in these trying times, we need to give them the resources to do so.”

Borrowers who are current on their home loans may be able to refinance for lower interest rates, even if they are seriously upside down. The Federal Housing Finance Agency (FHFA) announced on Monday that it will broaden the scope of the Home Affordable Refinance Program (HARP) by removing the current 125 percent loan-to-value cap for fixed-rate mortgages backed by Fannie Mae and Freddie Mac. Other program enhancements include, among other things, reducing certain fees, eliminating the need for a new property appraisal if the FHFA has a reliable automated valuation model (AVM) estimate, and extending HARP until the end of 2013. New federal guidelines for the HARP changes should be released to mortgage lenders and servicers by November 15.

The basic eligibility requirements for an enhanced HARP loan are as follows:

• Existing mortgage loan must be owned or guaranteed by Fannie Mae or Freddie Mac. Check here here to see whether a borrower has a Fannie Mae or Freddie Mac loan.

• Existing mortgage loan must have been sold to Fannie Mae or Freddie Mac before June 1, 2009.

• Existing mortgage loan cannot have been refinanced under HARP previously (except for Fannie Mae loans refinanced between March and May 2009).

• Current loan-to-value (LTV) ratio must be more than 80 percent.

• Existing mortgage loan must be current, with no late payments in the past six months, and no more than one late payment in the past 12 months.

 

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