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 Last February, conforming loan limits were TEMPORARILY increased from $417,000 to $729,750 for single family homes in high cost housing areas. Effective January 1^st the limit will drop to $625,500.

 A campaign by mortgage and real estate industries for legislation to extend the limit got put on the back burner by legislators due to the need to address the credit crisis.

 And, let’s face it; the legislative attitude towards the mortgage industry in the present and in the foreseeable future is not friendly. It is not politically prudent to do anything that could be perceived as helping any of us who may still be in that business.  Of course extending the limit would be good for the mortgage business. But what many politicians seem to miss is the fact that extending the limit will also benefit consumers in high cost housing areas.

 Elected national representatives with constituents in lower cost areas may not care much about legislation to help those in high cost areas. And there are more of them.  So don’t look for legislative help. The temporary limit will expire at the end of 2008.

 We spoke of a certain sense of urgency in our August 4^th Bulletin because of the December 2008 expiration.  Obviously nearly three months have passed, making it more urgent now.  But also, several lenders are giving notice that these loans must be funded before December 1^st. Even though legislation allows them to fund loans with temporary limits through the whole month, lenders are not required to make them available that long.

 So buyers and borrowers have less than two months to take advantage of the higher limits. That’s not much time. Buyers and sellers in the $750,000 to $800,000 price range; take note.

 If that’s all you need to know, you can skip the figures that follow. If you need numbers for a specific transaction, call your loan consultant.

 Buyers with limited down payments are best served by FHA loans requiring only 3% down payment. Until next January (and maybe this December) a buyer can purchase a home for $752,320 with $22,750 down and a 97% FHA loan of $729,750 (present loan limit). 

 But when the limit changes, buyers with 3% down will feel some hurt. With the new $625,500 loan limit, the maximum purchase price for a 97% loan will be $644,840.  So a buyer with roughly $20,000 for down payment can buy a home in the $640,000 price range.

 That’s a $112,000 hit in price range. The difference in quality and available inventory between $650,000 and $752,000 is huge.

 Conforming loans typically go to 90% of purchase price, so we’re talking about 10% down. So, when the limit expires 90% financing will be available to a purchase price of $695,000.

 Buyers in the price range from $750,000 to $800,000 - you should evaluate thoroughly the risks of waiting.  You should know that the conforming loan limit is expiring sooner than you might think. And rates for loans above conforming are not only significantly higher, they are much harder to get at any rate.

 Call your loan consultant for specifics. Take advantage of the temporary limit if you can.

George Remsberg has been a friend of mine and business colleague in mortgage lending for more than 10 years.  He has written this for me and will be featured in more productions coming up.  If you are in the mortgage business, by visiting his website listed below, you can get an automated version of his “Mortgage Momo’s” which comes our weekly formatted with your name and company logo and information - Thanks George!

©2008MortgageMemos.com

INVENTORY CHANGE - SILICON VALLEY

FOR THE FOURTH QUARTER OF 2008

(AREAS 1 through 23, that is: Gilroy through Sunnyvale)

Class 1 Properties (single family homes):

Overall Change from 9/27/08 to 10/18/08:

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Class 2 Properties (condominiums or townhomes):

Overall Change from 9/27/08 to 10/18/08