Newsletter July 29 2011 - The deadline for the expiration of Temporary High Balance Conforming Loan Limits is fast approaching!

I hope everyone is enjoying their summer. Unfortunately I have to bring you back to the real world. At the end of September the temporary “High Balance Confirming” limits for larger mortgage loans will expire. Although it is possible that Congress could extend them, I think it is safe to assume that since they found it almost impossible to keep the United States from defaulting on its sovereign obligations (let that roll around in your mind – simply unbelievable!) there is virtually no chance that they will even address the issue before the expiration date, let alone fix it.

I want you to be able to advise your clients about this issue, if it is relevant to them. If they expect to be in the market for a residential mortgage above $625,500 (but no more than $729,750) then they MUST begin the application process immediately! Once the temporary limits expire all loans above $625,500 will become “non-conforming,” which means that they will no longer be eligible for purchase by Fannie Mae or Freddie Mac. And that means an instant increase in the cost of those loans of approximately 0.50% in the note rate plus 1.00% in points.

And that is if the loan is available at all; once you get away from Fannie and Freddie you are in "Jumbo Land." That means you are at the mercy of the arcane, irrational and secretive underwriting of the likes of Bank of America, Wells Fargo and JP Morgan Chase. They just make up stuff whenever it suits them; they constantly surprise us with changes to their underwriting rules that never, ever favor the borrower.

In the chart reprinted below, the column titled “Permanent High-Cost” will be the limit for conforming loans that fund after September 30, 2011. To give us the best chance of getting a loan to closing at least a week before that date, we must receive a complete application no later than August 10, 2011.

Have a great week!

Margie Hofberg, President, Residential Mortgage Center Inc

Expiration of Temporary High Balance Conforming Limits

For Loans Funding on or after September 30, 2011