Most homebuyers have to get mortgages, and now that we are back to the days of cookie-cutter mortgages, most people can only get deals that will fit on the Fannie , Freddie or Federal Housing Authority assembly line. That’s why lenders and realty agents sighed in exasperation Friday when the Federal Housing Authority announced that the current limits for conforming mortgages will stay put. (Conforming mortgages is bureaucraticese for ‘cookie cutter.’)
The current state of affairs is that the limit is $417,000 for most areas of the country, and as much as $729,750 for ‘high cost’ areas, like New York and San Francisco. The lenders’ argument is that raising the ceiling to $729,750 to all markets would revive the market because people would be able to get more loan.
Fortunately, the bureaucrats did not buy this ridiculous argument. With housing prices continuing to slide, and more predicted for 2010, there is no rationale for increasing the maximum loan amounts.
As pretty much every analyst now agrees, employment is the key factor for reviving the housing market. That, and working off the huge overhang of foreclosures and bank-owned properties. Raising loan limits would throw the market into confusion. What we need now is stability and consistency.
Memo to lenders: please focus your efforts on cleaning up the loan portfolios you now have, instead of trying solve a problem that doesn’t exist.
Image courtesy of Morguefile contributor emmip.
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