Obama Administration Poised to Propose Mortgage Changes

by Mark Wellborn


The Obama administration could recommend reducing the size of mortgages eligible to receive government aid, The Washington Post reported this morning.

Currently, mortgages up to $729,750 are able to receive backing from the federal government, and these loans usually have lower interest rates than those that are not government-backed. Long-term (30-year) loans under $417,000 are eligible to receive the lowest rates, and as the size of the mortgage increases, the rates also go up.

The Post reports that the loan limit for mortgages receiving government support will likely be lowered to $625,500 as of September. The proposal will be part of a report expected next week that will also look into the fate of Fannie Mae and Freddie Mac.

Borrowers who will most be affected by this change are those taking out loans between what could be the new limit ($625,500) and the old limit ($729,750). From The Post:

Keith Gumbinger, a vice president at mortgage research firm HSH Associates, said he expects that borrowers who took out loans between $625,500 and $729,750 would pay “slightly more expensive rates” if the current proposal is enacted, “but jumbos were always slightly more expensive.”

See other articles related to: obama, mortgages, interest rates, freddie mac, fannie mae

This article originally published at http://dc.urbanturf.com/articles/blog/obama_administration_poised_to_propose_mortgage_changes/2951


  1. Mike said at 11:00 am on Friday February 4, 2011:

    This will be interesting for high end markets such as DC, SF and New York. The conforming limit being reduced to $625k in our area will most likely have a strong slowing impact on the middle of our market without a fed guarantee.  Banks will balance this by a) requiring higher credit scores b) bigger down payments c) higer interest rates.  How much of an impact will be the question.  The spread between jumbos and conforming loans is much wider in the past 2 years than it was historically.  The other effect is that we may see people move into smaller, conforming properties, increasing that demand.  Uggh, that inventory in Washington already is already way low(SFH in the mid 4s to high 5s).

  1. Mike said at 4:28 pm on Friday February 4, 2011:

    So is this a way of saying, you rich people don’t need government help and oh btw you don’t to live in a house that expensive? :-|

  1. It's A Lifestyle said at 2:30 pm on Saturday February 5, 2011:

    Yet again another move by Obama meant to crush our ever dwindling middle class.  I really wish he studied up on his history and saw that every great society crumbled as their middle class did.

  1. jag said at 2:17 am on Sunday February 6, 2011:

    Slightly higher rate for people buying 700K houses won’t make me lose any sleep tonight. I don’t consider that “middle class” or “crush[ing]” like It’s A Lifestyle apparently does.

  1. Jay said at 11:31 am on Sunday February 6, 2011:

    I hate to break it to you complainers out there, but if you are in a position to take out a $700k mortgage then you are not really what most of us would consider middle class and in need of a lot of government help. Get over it.

  1. to Jay said at 11:38 am on Sunday February 6, 2011:

    maybe in another city like Portland.  However, the cost of living in DC is substantially more.  What people fail to realize is that the qualifications for middle class fluctuate throughout the country.  For example, $1mm buys you a palace New Orleans, while that same $1mm won’t even get you anything comparable in DC.

    Fanny and Freddie would be better off keeping the maximum mortgage the same, but have people qualify for it based on NET income.

  1. jag said at 5:57 pm on Sunday February 6, 2011:

    Of course 700K doesn’t go as far in DC, but it’s still not middle class, no matter how you slice the numbers.

  1. Clark said at 12:05 pm on Monday February 7, 2011:

    If you take out a $700k then you are not middle class? Are you retarded or something?

  1. interesting said at 2:03 pm on Monday February 7, 2011:

    I have a ~$400K mortgage and an income of around $100K.  My mortgage + PMI + condo fee + tax every month is around $2800.

    I can barely afford my mortgage, though I do put 15% of my income into my retirement account.

    Scaling that to a $700K mortgage, that’s $4962.  Setting that as someone’s 33% pre-tax income per month, you’re looking at someone with $150K salary.

    I suppose you can consider that middle class if you’re looking at two income household… But in my opinion, you’ll need at least $200K to comfortably pay that $5K a month… Hmmm I suppose that for around here in that is also middle class.

    DC is weird.

  1. Mike said at 2:41 pm on Monday February 7, 2011:

    I don’t think so much of it as a class question, as a “what things cost in DC” question.  A lot of families here have dual incomes in order to pay the mortgage, it’s just an expensive place to live. My point is about supply and demand.  If you look at 2+ bedrooms in DC, there are about 550 for sale in the range from $350k to $800k.  20% of those fall into the $650 to $800 range, which is basically the homes that previously would fall into a conforming loan (after down payments).  These will now must likely need a non-government guaranteed loan that will be more expensive and harder to qualify.  But before we go and say “well eff those Richie Riches”, we should understand the ramifications.  If that segment of the market drives up to less demand, those people will likely seek properties in the next range down which does get a government loan guarantee.  The range of 500k to 650k homes is about 25% of the market, and if demand starts increasing, prices will too. The trickle down effect of people looking for more affordable housing even from the higher income levels will be reality.  Perhaps more sellers who have been sitting on the sidelines might get back into the market if prices rise, it’s hard to tell.  I’m just pointing out that it’s not just the “rich” people who will be impacted.

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