Fed Throws a Bone to Buyers
What it means for San Diego
According to the AP, one part of the economic stimulus package will benefit buyers by greatly increasing the maximum limit on government-sponsored Fannie Mae and Freddie Mac loans. Depending upon prices in the local market, such loans could reach $730,000, well beyond today’s limit of $417,000. San Diego, a high priced market, would qualify for large loans. This temporary measure would permit high end buyers to take advantage of lower interest rates. If approved, this opportunity would run through December, but an identical increase for FHA loans would be permanent. AP’s Alan Zibel continues:
“The National Association of Realtors has been pushing for a permanent expansion of the Fannie and Freddie limits. The trade group calculates that borrowers could save $3,000 to $5,000 per year in reduced interest costs as a result and projects up to 210,000 foreclosures could be prevented since refinancing into lower-rate loans would be easier.”
Uncle Giveth
Lower interest rates at no cost to anybody (can it be?)
What helps buyers will help sellers, in this case. Buyers have an incentive to buy while the rates are low. Combine that with attractive prices and Redfin refunds and this might just be the time and place to buy. Here are some East County homes that have dropped in price in the last two days and should qualify only under the new rules:
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Rich Toscano of voiceofsandiego.org points out that these loans carry no explicit guarantee and that Fannie Mae and Freddie Mac have been “mired in huge multi-year accounting scandals, and they either own or guarantee the payment of $4.9 trillion of mortgages.”. Nevertheless lenders take comfort in that ‘guarantee’ and will offer lower rates to those borrowers. You don’t want to think about who’s gonna pay if this system collapses. Take your loan and hope for the best.
Uncle Taketh Away?
What if Freddie and Fanny can’t solve their problems?
[data from generally reliable sources, please comment on any errors!]
