Belief in White Knight’s and “pixie dust” are not doing your clients any favors in the current market. I guess I have always had a “bankers state of mind” in all aspects of life.
A good friend of mind (who happened to be a seasoned therapist) once told me a was a “Pragmatic Romantic”. In other words, I love (and appreciate) romance; but not at the expense of practicality. It would not be a wise move to buy me roses, then tell me we were short on the mortgage payment!
I posted an article the other day about High Balance Loan Limits....Going, Going, Gone wherein I brought up the FACT that Fannie Mae will be reducing their maximum high balance conforming loans by a substantial $104,000 effective October 1, 2011.
I was grateful and humbled to see the post featured; more importantly, my intent was to get as much knowledge as possible out to agents so they can help their clients focus on their goals and opportunities over the coming months.
What really surprised me is the number of comments that were based entirely upon a wish or fantasy. Of course, this is my opinion as I am talking about the FUTURE; however, my opins are based on past experience, current market and political trends and the direction of the mortgage and real estate industry.
“I'm sure the lenders will come up with something else”
My response: I respectively disagree.......you have to remember that "high balances" affect a relatively small amount of the mortgage market. Further, like the 8K tax credit, the government cannot continue to shore up the facts of the marketplace.
It is the very action or thought process that the government will save the day that keeps people on the fence. The American consumer, in large part, is choosing to pass on the best financing opportunity in over forty years (I am referring the housing affordability index). The facts are that the regulations are in place for reduction on the loan limits effective 10/01/11. The facts are also that the Feds have commited to buying MBS (mortgage backed securities) through the second quarter...but that could change as the economy improves.
The Republicans have regained much control of Congress and there is little interest at the governmental level for continuing the ride on the tax rolls. Not trying to be harsh or argumentative; however, I think we all (agents and MLO's alike) do consumers a disservice by fostering any belief that governmental "pixie dust" is going make everything alright. I have maintained for the past year that we will hear nothing but "wishin', shudda, coulda" in the next year or so as the housing market rebounds. JMHO
ADDITIONAL NOTE: I have to believe the market is going to rebound in the coming year or two. If I didn’t, I could not in good conscious continue my career counseling consumers to buy real estate.
“In our area we don't worry too much about HIGH loan limits! Our average home sale is under $100K so we don't normally worry.”
My response: Your situation resembles the majority of the country; which is exactly why I stand by my comment (above). I do not anticipate this ruling will be changed.
“Hopefully the higher loan limits won't be allowed to expire as that's not going to help our market to recover.”
My response: Well I applaud hope, I don't think there is rationale or desire to extend the limits (please understand, my thoughts and comments have nothing to do with my personal beliefs or desires of whether they should stay or go...I am totally detached in my observations).
“I wonder if they are doing this to decrease liability or if this is keeping in lockstep perhaps with lower property values.”
My response: It is important to understand that the rulings are to return to "normal" market standards....it really has little to do with liability or lower property values. Just like it was unrealistic for people to think the 8K tax credit was going to be repeatedly extended; it is also unrealistic to think the Fed is going to extend buying MBS indefinitely and/or continue to manipulate the housing market. Again, my humble opin.
Please know that I have the utmost respect for the opinions and comments of those I have quoted...I just truly believe we (real estate agents and mortgage professionals) have a fiduciary responsibility to provide consumers the FACTS, not a version of our beliefs.
As for me, I gave up believing in White Knights and “pixie dust” a long time ago. Oh, expect for my friend, White Knight; whom I rescued from the most deplorable situation when I was in Indiana. In fact, I did not choose him...he chose me. Another post for another day.
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Deborah "Dee Dee" Garvin
NMLS #279125
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Deborah - First and foremost, your White Knight is absolutely precious looking and it's true, our fur babies do pick us. As a long time pet mama, you know you can always get my attention with a pic of a good looking doggy.
As for high balance loan limits, I'm surprised they have remained at this level for as long as they have. If you remember, they were always supposed to be temporary and they were actually supposed to expire last year. On a more personal note, it will have very little effect on my business. While I get the occasional high balance referral client, most of my client base are in conforming loan amounts (the old conforming loan amounts).
Your dog is absolutely GORGEOUS! I have a German Shepherd who would just love him, I am sure. ;-)
As someone who is in a more expensive market, I appreciate your forthrightness - and I happen to agree with your assertion we cannot keep bailing everyone out or propping up the markets. The government is simply going to have to step back and let the market forces work; will there be some pain in the meantime? Probably, but we have done nothing but delay that pain for too long - and you are right, everyone thinks the government is going to come galloping in one more time.
*Amen* Great responses. To me - a transaction absolutely has to make sense for the next decade - not just now.
Donne, He is rather cute, isn't he? The return to previous loan limits is going to significantly impact the SoCal market. Unfortunately, many are still in the "if I just keep my head in the sand long enough everything will be okay.
Susan, Knight is a very friendly dog...he loves going to our local dog beach...I bet they would have a blast together. I don't think people realize the the tide has turned at the Congressional level. I don't think we are going to see much in the way of innovative legislation going forward. I would love to be wrong, but experience tells me I am not.
Renee, In the SoCal market, I think a five to seven year (leaning on the longer) plan MAY be do-able. Your approach of a decade is even safer. This is not a market to buy and sell on the short term.