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REAL ESTATE NEWS- HOW CALIFORNIA REALTORS ( CAR) HELP PASS LOAN INCREASE LIMITS

The legislation will assist an estimated 400,000 homeowners facing foreclosure, many of whom reside in California, by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan.  The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas.

The bill permanently increases the conforming loan limit to $625,500.  C.A.R. has long advocated for higher conforming loan limits.  In February, the Economic Stimulus Act of 2008 was signed, temporarily raising the conforming loan limit in high-cost areas to $729,750 from $417,000 until December 31, 2008.

Although we would have liked Congress to make permanent the current $729,750 loan limit, C.A.R. is pleased with the new permanent loan limit of $625,500. It will allow California homeowners to refinance their loans into safe affordable loan products and allow first-time home buyers to enter the market.

The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area’s median home price, up to $625,500.  The new FHA loan limit will be the greater of $271,050 or 115 percent of an area’s median home price, up to $625,500.  Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008. 

C.A.R. also supports the following bill provisions:

• A temporary increase in mortgage revenue bonds to refinance subprime mortgages.  
• New regulator for Government Sponsored Enterprises to restore investor confidence in GSE loans and help the market and economy stabilize.
• First-time home buyer tax credit, which allows first-time home buyers to receive a tax refund worth up to 10 percent of a home’s purchase price, up to a maximum of $7,500.  The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.
• Temporary raise in the loan limit for the Veterans Affairs home loan guarantee program to the same level as the economic stimulus limits until the end of 2008.
• Adjustment to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), allowing sellers to provide the non-foreign affidavit to a qualified closing entity and not just the buyer.
• The setting of minimum requirements for mortgage originators, which mandates fingerprinting of loan originators and establishes a nationwide loan originator licensing and registration system.  The requirements do not apply to those only performing real estate brokerage activities unless they are compensated by a lender, mortgage broker, or other loan originator.  States will have the ability to implement more stringent laws.
• The creation of a National Affordable Housing Trust Fund to help cover the cost of the FHA rescue plan for the first five years and develop affordable housing in subsequent years. 

Other provisions in the legislation: 

• The Treasury Department’s proposal to create a federal backstop program to insure the financial well-being of Fannie Mae and Freddie Mac.
• The FHA’s inability to insure loans that utilize a seller-funded down-payment assistance program.  Down-payment assistance from family, employers and other nonprofits is still allowed.
• The Community Development Block Grant Programs’ $4 billion allotment for communities to purchase and refurbish foreclosed homes.

C.A.R. REPORTS SALES INCREASED 17.5 PERCENT; MEDIAN HOME PRICE FELL 37.7 PERCENT IN JUNE
Home sales increased 17.5 percent in June in California compared with the same period a year ago, while the median price of an existing home fell 37.7 percent, the CALIFORNIA ASSOCIATION OF REALTORS(R) (C.A.R.) reported Friday.

"Statewide home sales remained above the 400,000 level for the second month in a row, and up nearly 18 percent from a year ago," said C.A.R. President William E. Brown.  "Following a 30-month string of year-to-year percentage decreases that began in October 2005, sales last month also posted their third consecutive year-to-year gain."

The median price of an existing, single-family detached home in California during June 2008 was $368,250, a 37.7 percent decrease from the revised $591,280 median for June 2007, C.A.R. reported. The June 2008 median price fell 4.3 percent compared with May's $384,840 median price.
More info: http://www.car.org/newsstand/0608junesalesandpricereport/

NEW STUDY SUGGESTS HOME LOAN LIMITS, NOT SUBPRIME BORROWERS, LED TO MORTGAGE CRISIS
A new study from the UC Irvine Paul Merage School of Business Center for Real Estate suggests that the private mortgage industry, not subprime borrowers who took out risky adjustable rate loans, led to the current lending crisis that resulted in the dramatic rise and fall of home prices across the country and mounting foreclosures.

According to the study, had loan limits for Fannie Mae and Freddie Mac, the nation's two largest mortgage lenders, been lifted ahead of the current housing crisis, the two agencies would have been able to provide more loan products for borrowers, and the private mortgage sector would not have pushed as many subprime loan products��"loans that, for many homeowners, became unaffordable as their initial adjustable interest rates reset at higher amounts.

"We were quite surprised to find the intensity of subprime lending was insignificant after controlling for all the other factors influencing the market, but we were really blown away when Fannie's and Freddie's continuing presence in the market was shown to be so important," said Kerry Vandell, UCI finance professor and Center for Real Estate director.
More info: http://www.merage.uci.edu/CalendarAndNews/PressReleases/PressReleases.aspx?ReleaseID=224