Real Estate and Mortgage State of the Market

Fannie, Freddie Raise Limit on Mortgages. Effective January 1, new limits are $417,000 for a conforming mortgage on 1 unit, $533,850 for 2 units, $645,300 for 3 units, and 801,950 for 4 units. I was expecting something significantly lower, in the $380,000 to $400,000 range, but they're likely playing some catch up. It will make a real difference to a lot of folks.



On another front, Lenders Push Envelope to Get More Biz, just like I've been writing about.



Mildly surprising that it wasn't worse: Housing starts drop. I would expect all of the destruction on the Gulf Coast to have ameliorated it. But my brother, who works in home building, has been laid off as the builder he was working for has decided to hold off building stuff they already have permits for. He's not alone by any stretch of the imagination.



Fannie Mae says more errors found. Errors. That's certainly one word for it, but that kind of implies 'honest mistake' to me. If it's intentional, most people call it fraud.



Bernanke Urges Limits on Fannie Mae and Freddie Mac Holdings. Well, I understand why, with accounting fraud like above being endemic at both. On the other hand, if their holdings are limited, that will largely frustrate the reason they exist and have some taxpayer guarantees in the first place. "Shortages" of money at Fannie and Freddie, really them not being able to fund all the A Paper conforming mortgages that are called for, will impact those who really do take good care of their finances and credit in a really negative way, as the margins for A paper loans rise. It would be a better thing to limit, phase down, or even phase out the taxpayer guarantees behind Fannie and Freddie. Of course that might be bad news for Fannie and Freddie investors. But Bernanke's proposal is nothing short of a gold mine for A paper mortgage lenders. Furthermore, it will further exacerbate the pain from any decline in housing values.



Remember, Bernanke and Greenspan are both bankers first, not economists. Although that certainly does enter into their job function, their first loyalties are to the banks they regulate.



As soon as Lorie Limbaugh heard about a 1.25 percent interest rate on a mortgage loan, she figured it was too good to be true. Then why did they go and do it? Basically, they were lied to. If you want to be lied to, I have all kinds of lenders who will do 1 percent nominal rate, but it's not the rate you are really being charged. The more you shop around, the more you increase your likelihood of their competition - who works in this field every day - telling you what's actually going on. They said they talked to other loan officers, but I'll bet a nickel that they are one of those people who thinks they're being slick by demanding "What's your lowest rate?" over the phone, and hangs up when you try to find out what's going on. The other lenders they called were honest, and said they couldn't beat 5.7%. So they ended up rewarding the crook for scamming them.

Caveat Emptor