Fannie's Problems & Higher Loan Limits

Fannie Mae and Freddie Mac, the two quasi-government corporations that were formed to aid in keeping the nation’s housing market liquid, have raised the conforming loan limits for the year to $359,650. Home loans under this amount will carry about a quarter percent better interest rate than loans above that amount, and are underwritten (approved) using standard qualifying guidelines.

Speaking of Fannie Mae, there is a big Enron-type problem brewing that accountants are estimating may cost upwards of $9 billion dollars to fix. The particulars of this accounting scandal are just as convoluted as the Enron debacle but even farther reaching- instead of “just” the investors losing money it has the ability to affect the entire nation’s housing values!

The Federal Reserve Board raised short-term interest rates again earlier this month. The Fed has raised these rates 5 times in the last year, and most economic pundits expect the increases to continue over the next few months. These raises affect the adjustable rate mortgages immediately with fixed rates eventually following under normal circumstances. However, in the current economic climate - the surging deficit of the federal budget and the dollar’s plummet against many of the other world’s currencies- normal doesn’t currently seem to apply. Fixed mortgage rates have remained low, currently in the mid-5% for 30 year mortgages. How much longer is anybody’s guess; but when they do start to increase they will more than likely do so rapidly and with great vigor!

I wish everyone a Merry Christmas, Happy Holidays and a healthy and prosperous New Year.

Fixed Rates for Conforming Mortgages (under $359,650) as of 12/20/04 (a.m.) are:
(Rates quoted are for 0 point mortgages)
30 year: 5.625% (APR 5.705%) payments are $2,070.35/mo.
15 year: 5.0% (APR 5.13%) payments are $2,844.09/mo.