Saturday, January 26, 2008

On Raising the GSEs' Limits

This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,” said Lori Staehling, president of the San Diego Association of Realtors.

* * *
Because the proposed change would make their houses more affordable to buyers, their houses might sell more quickly and for a higher price,” he [Matt Colonell, mortgage broker with Obispo Mortgage in San Luis Obispo] said.

* * *
NAR President Richard Gaylord, a RE/MAX broker in Long Beach, Calif., said that raising the loan limit on conventional financing is urgently needed. "The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas," he said. "It is grossly unfair that some Americans do not have access to low-interest rate loans..."

* * *
The idea behind the higher limits is to stoke demand for homes in high-priced housing markets such as the East Bay and other parts of the Bay Area. "It will be as if interest rates are on sale. You could create urgency..." [said Vickie Nyland, president of the Bay Area division of Taylor Morrison, a homebuilder]

* * *
Increasing the conforming loan limit will help homebuyers in the Los Angeles area at no cost to the taxpayer. If local banks can sell the loans they extend to Fannie Mae and Freddie Mac, the interest rates on those loans will be roughly ¼% lower.

* * *
The proposal would also allow buyers in the market, looking to finance a property with a loan of $729,950 or less, to make the purchase more affordable than it otherwise would have been under the current law.

* * *
Leslie Appleton-Young, chief economist for CAR, said decreases in the statewide median prices seen in recent months were the result of difficulties in obtaining jumbo loans.

[California governor] Schwarzenegger maintains that moderate- and low-income families in high-cost housing markets are "hit hardest" by the conforming loan limit, because it restricts their access to lower-cost, lower-down-payment, fixed-rate loans. "Lifting the GSE loan limit ... would help put affordable home purchase and refinancing options within their reach," the governor said...

* * *
The proposed new limit for mortgages with the most attractive interest rates would be, for costly markets such as the Bay Area...

"The changes would offer the stability needed to offer more home loan products," said Terry Francisco, a Bank of America spokesman. "If we and other lenders can offer more products, that will increase competition..."
And the list goes on.

So according to the real estate industry, the current "problem" with the housing market is a lack of affordable loans, not a lack of affordable house prices. As if a self-serving redefinition of affordability wasn't enough. We again need more "affordability products".

I cannot help but laugh at the depravity of the real estate industry and its political lackeys. So we are now back to the "affordability loan" thing. Clearly, the NAR, the CAR, and real estate agents have not learned a damn thing by the carnage they have helped to create all in the name of their 6% commission. Clearly, they have no qualms (moral or otherwise) about using the devastation currently being suffered by the hoards of "FBs" (which they helped to create) to push a feckless and foolhardy policy that they have been lusting after for many, many years; the real estate industry has no scruples over trying to re-inflate the housing bubble for just a little while longer even if it means extending the pool of FBs. Apparently, all that matters to them is the 6% commission; the people they claim to serve can all go to hell.

If this futile proposal to raise the conforming loan limit becomes law (and we all know it will be permanent) and when the inevitable backlash arrives, when the legion of FBs finally realize that the real estate industry's attempt to keep their dream of easy real estate riches alive was nothing more than a shameful attempt to continue to line their pockets at the expense of buyers for just a little longer, you, Mr. and Mrs. Real Estate Industry, will be "reminded" of your support. The collaborators will be named. The law suits will fly. A lot of eyes are watching, a lot of blogs are recording what you say and what you do. You can't hide. The tar and feathers are waiting for you.

Using people's current suffering to make a desperate, last minute, and short-sighted attempt at re-fueling unsustainable and unaffordable house prices via GSE loan limit increases is plain and simply wrong.

Do the right thing: Let the housing markets correct and heal themselves.

But then again, now that the NAR has gotten its way and Fannie Mae has changed its mission from helping poor and middle class families buy homes to helping mortgage bankers and lenders make money, why am I surprised? Sick. Just sick.


Blogger taylor1042 said...

the GSE's only purchase loans with either (a) a 20% down payment; or (b) mortgage insurance. the latter costs 50-150bps, depending on the borrower's creditworthiness.

the GSE's also require full income and asset verification.

the combination of 20% down + full doc will make them very limited players in CA markets.

i wouldn't worry too much about a GSE-jumbo price bump. prices will reach their natural level.

Jan 26, 2008, 4:38:00 PM  
Blogger Lisa said...

I know the MSM and the industry hacks are cheering this. They are desperate to bring back the days of easy money.

But as Taylor so succinctly points out, GSE loans are absolutely NOT easy money. The real killer is their income to debt ratios. We all know that if people really COULD afford these prices, the market would never have created stated income, low doc, no doc, pick your payment crap. These products were created precisely because people can't really afford these prices.

I'm starting to think this is another ploy to keep the sheeple from a mass leave-the-keys-on-the-counter exodus. Keep them thinking there's hope for values to stay propped up. So, just keep making that big mortgage payment, and you'll see, market recovery is just around the corner. This spring. This summer. This fall. The horizon is always just a few months away. It's like Paulson's plan for the super SIV fund. That sure went by the wayside. And I'm not hearing a whole lot about Hope Now, or whatever that sham was called for the subprime borrowers.

I actually think it could cause an accelation in price declines, because if this goes through, there will be NO SUCH THING as a non-conforming jumbo mortgage up to, what is it, $725K for the Bay Area? That means ONLY qualified buyers will be able to purchase homes. You know, all 4 of them.

The SF Chronicle ran an absolutely mad-as-hell headline today: Republican Resistance to Raising Loan Limits. Like if it doesn't happen, we're sunk.

You know what, we're sunk. There's nothing they can do to reinflate the bubble.

While it must be scary as hell to realize that your retirement dreams, kids' college fund, etc. was all based on a big Ponzi scheme, that's the reality, folks.

Jan 26, 2008, 8:39:00 PM  
Blogger Marinite said...


I realize that raising the GSE limits will have little if any overall effect and that the housing bubble will invariably end the way it currently is.

The point is that the NAR and its lackeys are pushing for a change that they have drooled over for years and yet has been repeatedly denied during calmer times, when people were not panicking and had cooler heads. The NAR is using today's panic and the suffering of many people in foreclosure to get something that, during more rational times, people decided was a bad idea.

Jan 27, 2008, 11:30:00 AM  
Blogger marine_explorer said...

The SF Chronicle ran an absolutely mad-as-hell headline today: Republican Resistance to Raising Loan Limits

How dare they threaten to undermine Chron's RE ad revenues!

Have any geniuses at the SF Comical paused to consider what happens if SFBay RE never corrects? Do they really think bright, young grads will move here to contribute to our economy--when facing the certain prospect of a wretched family life in some cramped, dark condo and paying stupid money for everything else?

Few people are facing the obviousness of the situation here because it interferes with their money angle.--which will shortly dry up because these schemes are obviously never sustainable.

Jan 27, 2008, 1:54:00 PM  
Blogger Lisa said...

"The NAR is using today's panic and the suffering of many people in foreclosure to get something that, during more rational times, people decided was a bad idea."

Prices went UP just fine without an increase in GSE limits, but now we need it because prices are going DOWN. The ultimate in twisted logic.

As for NAR, they're doing what every other corporate group does in Washington....lobby the government to line their pockets.

Seriously, I think this is just about giving the sheeple more false hope. So was today's Chronicle article about foreigners buying RE here, despite the fact that NO RECORDS are kept about about who is a foreign buyer versus who is a U.S. citizen. Much ado about nothing, bottom line. But hey J6P, keep making that bloated mortgage payment. Market recovery is just around the corner.

We'll see massive levels of foreclosures anyway, regardless of what NAR does. And until the ordinary person really wants to face what's happening, and the MSM starts to nail them on what they've done to this country's economy, the NAR will continue to spin away.

A friend told me over the weekend that now was a good time to start looking for a house. I replied I would buy when all the stupid money was flushed out, but not before. End of conversation.

Jan 27, 2008, 4:38:00 PM  
Blogger Matthew said...

Raising GSE limits plays right into the minds of all the players of this debacle... the politicians, the NAR and RE machine, the mortgage / banking industries and all the recent FB's... only problem is, it means very little for those who are not playing the game and see it for what it really is..

I'm with you Lisa on waiting for the dumb money to be flushed out of the system... this ploy w/GSE limits may delay it by a little (maybe), but it won't stop it... It can't stop it, even in Marin..

I'm still amazed at the general lack of awareness of what's going on in the housng and credit markets right now. I carpool on occassion with some pretty educated people, and none of them have any real idea of what's transpired over the past 2-3 years. "Subprime" is all they know, so the MSM's and the NAR's spin on this economic catastrophy is working.... "It's all those lazy and poor people who lied about their incomes"... just amazing... sheep to slaughter, just the way the CAR and NAR wants it..

Jan 27, 2008, 10:21:00 PM  
Blogger Matthew said...

Anyone know of a Presidential candidate, besides Ron Paul, who's against raising GSE limits?

To hell with it, I'm back in the Paul camp..

Jan 27, 2008, 10:40:00 PM  
Blogger Matthew said...

Heard a insightful commentary the other day from a CNBC nay sayer on this government stimulus package.. (sorry, can't remember her name).. Anyhow, she said, "the whole thing is ludicrous… why not just cut out the middle man and have the government go out and buy a bunch of sweaters and shirts and put them in a pile for the consumers to pick over”..

hey, I’ll take my check, but “EXACTLY”..

Jan 27, 2008, 10:49:00 PM  
Blogger Matthew said...

One more post (sorry, but can't resist when I see good old Leslie Appleton-Young quoted).

“ Leslie Appleton-Young, chief economist for CAR, said decreases in the statewide median prices seen in recent months were the result of difficulties in obtaining jumbo loans.”…

WRONG AGAIN TOOTS.. Decreases in prices were because prices got way, way out of whack with historic pricing and way, way out of whack with incomes and rents... even with no changes in any jumbo loan programs or liar/stated income loans, this house of cards was going to come down sooner or later… the difficulties in obtaining jumbo loans now is symptomatic of this basic causal factor… who the hell would loan that kind of money on an over inflated / priced anything ?

Jan 27, 2008, 11:04:00 PM  
Blogger Lisa said...

"I'm still amazed at the general lack of awareness of what's going on in the housng and credit markets right now."

And the MSM certainly isn't helping matters. Just five minutes ago on CNBC, Diana Olick (their housing "guru") said the problem is one of credit availability and confidence. I wanted to scream at the television, the problem is PRICE, you idiots.

But in the end, because no one seems to want to acknowledge what the problem is, they sure as hell won't be able to "fix" it. Raise the GSE limits, and you've knocked out unqualified buyers all the way to $725K in the Bay Area.

And yes, the Subprime thing has been played like a violin. I think that will change later this year, as we start to see real cracks in Alt A. There have been articles mentioning that Alt A and Prime loan portfolios are starting to weaken as well, but the Subprime label isn't going away. And we all know the AltA and Prime loans are way bigger than Subprime, so that's the real tsunami.

Jan 28, 2008, 8:20:00 AM  
Blogger marinite2 said...

Yep, the whole "foreigners are going to save our market" line. Is that an indicator of the last phase of desperation? If not, what's the next desperate myth?

This quote from the Chronicle article pretty much sums it up:

“I know that there are a lot of sellers who want that to be true," said Malin Giddings, who specializes in upscale San Francisco real estate for TRI Coldwell Banker. "But we see very few foreigners buying.”

Jan 28, 2008, 9:57:00 AM  
Blogger marinite2 said...

This comment has been removed by the author.

Jan 28, 2008, 11:09:00 AM  
Blogger marinite2 said...

At least not all politicos are on board with this issue:

“Complicating the debate are the substantial financial losses that both Fannie and Freddie have racked up during the mortgage meltdown. In light of such problems, Sen. Richard Shelby, the senior Republican on the Senate Committee on Banking, Housing and Urban Affairs, said it’s imperative to increase control over Fannie and Freddie before allowing the companies to take on additional risk.”

“‘Doing so in the absence of such a process enables thinly capitalized entities with recent accounting problems to provide a high-risk benefit to the wealthiest Americans without any real consideration of the need to do so or of the risks it presents to the taxpayer,’ Shelby spokesman Jonathan Graffeo said in an e-mail.”

Jan 28, 2008, 11:17:00 AM  
Blogger Lisa said...

“I know that there are a lot of sellers who want that to be true," said Malin Giddings, who specializes in upscale San Francisco real estate for TRI Coldwell Banker. "But we see very few foreigners buying.”

Nonetheless, this article was front and center in the Sunday Chronicle. So now that even locals can't buy with tighter standards, foreigners will ride to the rescue.

Jan 28, 2008, 12:30:00 PM  
Blogger D3U7ujaw said...

The trend now is for even the not-so-F Buyer to "walk away" as the prices go down, see Mish, Calculated Risk and others. This is the ultimate revenge on loose lending and zero-down as credit markets take a beating, mortgage interest rates go up to price in obvious, gaping risk, home prices fall as the market saturates and real estate agents go back to making an honest living dancing topless on tables.

Jan 28, 2008, 5:00:00 PM  
Blogger Matthew said...

Amongst all the things that bug me with raising the GSE limits is the notion that the average CA home, absent all the false inflators these past 6-7 years, is worth this $729K number... it brings credibility to all the BS that has transpired that got house prices to where they are..

Of course, the other thing that bugs me is the CAR and NAR support it... that's really all I have to know to cast my vote and sentiment against..

Jan 28, 2008, 6:10:00 PM  
Blogger bob said...

The idea behind the higher limits is to stoke demand for homes in high-priced housing markets such as the East Bay and other parts of the Bay Area. "It will be as if interest rates are on sale. You could create urgency..." [said Vickie Nyland, president of the Bay Area division of Taylor Morrison, a homebuilder]"

That pretty much sums up what's really going on with industry mouthpieces. At least this clown had the audacity to outright say it. In other words, the 'fear' of being priced out and as he calls- urgency- is now gone from the market. That would be admitting what most of us already know, which is that much of this boom was created entirely by manipulation, fear, speculation,greed, and misinformation by vested interests.

Bull-Shit. That's what I think of this so-called raising of the loan limit. We've been talking about this on Ben's blog for a week now and we all agree that this will not help anything or anybody get into a home simply because banks at this point have little interest in giving out money to anyone showing less than perfect anything.

It also speaks volumes as to what the actual buyer can afford. A 750k house had better be bought by someone making at least 250k per year, which even in this area is a tiny margin of the populace.

My biggest concern about all this is that This measure could potentially set the course for the next boom, whenever or if it happens. Clearly people borrowed way the hell more than the previous limit and given the power will borrow even more.

But am I worried about this latest attempt to shore up a sick housing market that must and will come crashing down? Not a hair.

Jan 29, 2008, 1:11:00 PM  
Blogger Unknown said...

Chill out and stop being so angry. Your arguments have nothing to do with giving easy credit or pay option loans out! This is about spanning the gap between the jumbo "fixed rate" at 8 plus percent and a GSE below 6%. It is a full doc heavily underwritten loan and would help make the market correct instead of crash. People that honestly can document income and assets would be the benificiaries of this not the realtors and fast cash investors, who by the way are the real problem. Thousands of people that would like to stay in their homes in the neighborhoods won't have to try to sell to get out from under an adjustable rate loan. While I don't like the size of the loan limit($550,000 is a better number) because it is too large it will help to stimulate the jumbo market to get realistic and affordable. I will say right now that we would not have had a bubble if there was no such thing as a 100% NINA investor loan where the investor had no documentation or risk in the transaction and they could have up to 20 properties. The easy money realestate guru's and lax lending qualifications have gotten us to this point and that is now over! I have to say again. Stop praying for the sky to fall! If it does, who knows what it may bring with it! Maybe your whole lively hood will go with it. I definately believed and still believe that the market was way out of wack, but don't hate on everyone that is caught up in a mess that they may not have made for themselves. In response to this couple(of LOONS!) that are wanting to blame everyone for their stupidity, I am going to play the devils advocate. Every Realtor that claims to be a fiduciary is full of ducheiary! They are over paid taxi drivers that rival Don King in the hype arena! They are claiming to be like an attorney, but yet they get paid by a percentage of the sales price of a home. They should have to document the time and activities that they perform ( but it might be hard because most can't add or document!) and send a billing to closing or negotiate a set amount prior to the closing from the buyer to be paid out of the sellers proceeds. The same with a listing agent. If there is one thing that needs to changed it is the way a person that is paid more than every person combined on a realestate transaction doesn't carry the responsibility to make sure that the buyer and seller are truely represented and protected. That is the industry that needs to be washed clean! Every bored house wife or out of job executive is in realestate in one way or another and Realtors have more than their fair share!

Feb 4, 2008, 5:31:00 PM  

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