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(CNN)   Fannie Mae and Freddie Mac are raising the allowable limits for government backed loans to their highest levels IN ALL HISTORY. This should end well, no reason to think it won't   (cnn.com) divider line
    More: Facepalm, Mortgage loan, limits of government-backed loans, high-cost areas, Real estate, Mortgage giants Fannie Mae, maximum loan limit, Federal Housing Finance Agency, home prices  
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449 clicks; posted to Business » and Main » on 30 Nov 2022 at 11:50 AM (9 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



19 Comments     (+0 »)
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2022-11-30 11:52:33 AM  
Borrowing limits should increase with inflation. In borrowing limit should always be the highest in all history without any "oog booga".
 
db2
2022-11-30 11:53:23 AM  
Surely the outcome will be entirely different than 2008 this time!
 
2022-11-30 12:10:43 PM  
McMansions for all!
 
2022-11-30 12:23:27 PM  

db2: Surely the outcome will be entirely different than 2008 this time!


Are junk bonds being created from bad loans and being rated "AAA" again?
 
2022-11-30 12:25:22 PM  
Um, that's called inflation Subby. Every time they raise it it's the highest it's ever been.
 
2022-11-30 12:29:12 PM  

GregInIndy: Um, that's called inflation Subby. Every time they raise it it's the highest it's ever been.


Unless, of course, it was lowered last time and then insufficiently raised to beat the previous threshold.

Of course, have they ever actually lowered the threshold, or should they?
 
2022-11-30 12:34:58 PM  
What are they going to do? Not pay their mortgage?
 
2022-11-30 12:35:41 PM  

max_pooper: Borrowing limits should increase with inflation. In borrowing limit should always be the highest in all history without any "oog booga".


The borrowing limits are well over the average house price.
 
2022-11-30 12:48:08 PM  

max_pooper: Borrowing limits should increase with inflation. In borrowing limit should always be the highest in all history without any "oog booga".


Exactly, it is basic math.   Apparently, subby took math at Trump University.
 
2022-11-30 12:49:03 PM  
As long as the borrower is meeting the other aspects of a conforming loan like credit rating, employment history, debt/income ratios and down payment, why does there even need to be a limit?

When we bought our current home we actually put down a smaller down payment than initially planned in order to push it into jumbo territory because jumbo rates at the time (2015) were lower than the rates on conforming loans.
 
2022-11-30 12:56:18 PM  

Intrepid00: max_pooper: Borrowing limits should increase with inflation. In borrowing limit should always be the highest in all history without any "oog booga".

The borrowing limits are well over the average house price.


It might come as surprise to you but some homes are above the average house price while some are below.

\averages?
\\how do they work?
\\\slashie, slash, slash
 
2022-11-30 1:01:41 PM  

max_pooper: Intrepid00: max_pooper: Borrowing limits should increase with inflation. In borrowing limit should always be the highest in all history without any "oog booga".

The borrowing limits are well over the average house price.

It might come as surprise to you but some homes are above the average house price while some are below.

\averages?
\\how do they work?
\\\slashie, slash, slash


Specifically, the increase of the limits tracks exactly with the increase in home prices over last year. So the increase in loan limits is clearly about maintaining the same level of access to the program.
 
2022-11-30 1:30:10 PM  

GregInIndy: Um, that's called inflation Subby. Every time they raise it it's the highest it's ever been.


That's a rather unsensational and not inflammatory way to state it.
 
2022-11-30 1:38:53 PM  
Will subby next be complaining that the cost to ride the bus has increased 6,000 percent since 1930?
 
2022-11-30 1:59:37 PM  

OptionC: As long as the borrower is meeting the other aspects of a conforming loan like credit rating, employment history, debt/income ratios and down payment, why does there even need to be a limit?


Not to be demeaning, but I'm going to assume that you really don't understand what the article is referring to.  These are not bank loans but rather government backed loans which means that certain federal regulations have be met in order to qualify for them.  Fannie and Freddie were both founded with the intent of ensuring that affordable interest rate home loans would always be available for the average citizen.  They were not created with the intent of being used to back, say, a luxury home, office complex, or a REIT.  Since the government covers the loan in the event of default, that effectively puts the ultimate liability of the loan on taxpayer (i.e. you, personally, assuming you are US citizen) so the laws are in place to, arguably, protect taxpayer liability but also prevent abuse by people or companies who don't need them.  If you are talking about a normal mortgage, then I would agree with your sentiment, but the mortgages being referenced in the article are not.  They are effectively special purpose loans and the limits surrounding them are what define their special purpose.

/Yes, I know Fannie and Freddie have been privatized and that creates some ambiguity surrounding ultimate liability, but its a complex point and not an issue worth getting into here.


As an aside, the quote below confirms what a few other's have said in that any limit increase will always result in the highest limit ever.  Subby didn't read their own effing article or they didn't understand it.  Either way, dumbass confirmed.

"It is FHFA's practice not to allow loan limits to decrease. When home prices decline, loan limits remain the same as the prior year until house price declines have been "made up." For example, following the housing crash, the baseline loan limit value did not change in 2007 and remained at the same level until 2017, when they increased again."
 
2022-11-30 2:08:35 PM  

davypi: Not to be demeaning, but I'm going to assume that you really don't understand what the article is referring to.


I understand quite well what a conforming mortgage is, I just wonder why they bother having an upper limit on value (or at least why it is so low).  Even with the extended limits for high priced areas, virtually every house in Silicon Valley is going to be a jumbo mortgage which seems kind of silly.
 
2022-11-30 3:22:41 PM  

OptionC: davypi: Not to be demeaning, but I'm going to assume that you really don't understand what the article is referring to.

I understand quite well what a conforming mortgage is, I just wonder why they bother having an upper limit on value (or at least why it is so low).  Even with the extended limits for high priced areas, virtually every house in Silicon Valley is going to be a jumbo mortgage which seems kind of silly.


Well, again, the point of these company's existence in the first place is to provide affordable housing to the general public.  I don't particularly feel like my tax money ought to be used as backup collateral for somebody who wants to buy a beach house so they can lease it out on AirBNB.  We're supposed to be funding affordable housing, not using it as venture capital.  So, my question to you would be, if you remove the limit, how are you then going to define the use of these loans in a way that keeps it reasonably restricted towards its original intent?  Honestly, I'm not sure what prices are like in the Valley and as bonkers as the market is right now I wouldn't really doubt that this is a legitimate concern.  As such, I would not be opposed to an argument that the current method we have for establishing a cap is outdated, but I'm not sure I would buy in to absolute cap removal, at least not without a very well defined loan usage policy.
 
2022-11-30 3:33:00 PM  

max_pooper: Intrepid00: max_pooper: Borrowing limits should increase with inflation. In borrowing limit should always be the highest in all history without any "oog booga".

The borrowing limits are well over the average house price.

It might come as surprise to you but some homes are above the average house price while some are below.

\averages?
\\how do they work?
\\\slashie, slash, slash


I said well above. Not above. This new limit is to cater to McMansions and high income earners that should be on jumbo loans.
 
2022-12-01 1:15:36 AM  

Tyrone Slothrop: db2: Surely the outcome will be entirely different than 2008 this time!

Are junk bonds being created from bad loans and being rated "AAA" again?


Yes, the outcome will be entirely different than 2008, because since 2008, there are strict FHA income documentation requirements.
Since 2008, nobody is getting a govt-backed mortgage without explicitly proving they can afford it. And it's worked very well.
 
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