No Changes to 2013 Conventional Loan Limits By Melanie A. Feliciano Esq.
The Federal Housing Finance Agency (FHFA) has announced that the 2013 base and “high-cost” or “jumbo” conforming loan limits for first-lien and second-lien loans will remain unchanged from the maximum conforming loan limits for 2012. Note that loan limits apply to the original loan amount of the mortgage loan, not to its balance at the time of purchase by Fannie Mae, and the loan origination date is the date of the note. For more detailed information about conventional conforming loan limits for 2013, please refer to Fannie Mae’s Lender Letter LL-2012-11 (https://www.fanniemae.com/content/announcement/ll1211.pdf) and Fannie Mae’s Web site here (https://www.fanniemae.com/singlefamily/loan-limits).
Effect on certain high-cost tests Any time there is a change in the conforming loan limits, the following state high-cost tests can be impacted: California, the District of Columbia, Georgia, Indiana, Maine, New Mexico, New York, North Carolina, Tennessee, Texas and South Carolina. Specifically, the rules governing the applicability of these states’ high-cost tests are determined in part by reference to the then-current conforming loan limits. Note that for both North Carolina and Tennessee, the Fannie Mae conforming loan limits will have no impact on their respective high costs tests. As with the year 2012, the applicable loan limits in 2013 for one-unit properties in the states and counties listed below will remain as follows: California:
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$417,000 (all counties except as follows) $463,450: Alpine $474,950: El Dorado, Placer, Sacramento, Yolo $477,250: Nevada $483,000: Monterey $520,950: Sonoma $529,000: Mono $546,250: San Diego $561,200: San Luis Obispo $592,250: Napa $598,000: Ventura $625,500: Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz
Dist. of Columbia1:
$625,500
Georgia:
$417,000 (all counties except Greene County—conforming jumbo loan limit is $515,200)
Indiana: Maine:
$417,000 (all counties) $417,000 (all counties)
New Mexico:
$417,000 (all counties)
New York:
$417,000 (all counties except as follows) $625,500: Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester
South Carolina:
$417,000 (all counties)
Texas2:
$417,000 (all counties)
Melanie A. Feliciano Esq. is DocMagic Inc.’s chief legal officer. She may be reached by phone at (800) 649-1362 or e-mail melanie@docmagic.com.
Footnotes 1—The District of Columbia Home Loan Protection Act of 2002 (the DCHLPA) applies to a loan if, among other things, the principal amount of the loan does not exceed the Fannie Mae conforming limit for a comparably sized dwelling. 2—The Texas high-cost home law applies to a loan if, among other things, the principal amount of the loan does not exceed onehalf of the Fannie Mae conforming loan limit for a single family, two, three- or four-unit dwelling.
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2009 n 5.00 percent: Obama Administration announces Making Home Affordable announcement (02/20/09). n 5.42 percent: Treasury rates sharply rose and reached a 2009 high on a better than expected June unemployment report. n 4.93 percent: Treasury rates fell sharply after Dubai sought to delay sovereign debt payments. 2010 n 4.97 percent: Treasury Rates rose on optimism of a recovering U.S. economy and a temporary lull in news of a developing debt crisis in Europe. n 4.17 percent: 30-year mortgage rates reached percentage in early November, marking the lowest level observed since Freddie Mac began tracking rates in 1971. 2011 n 4.51 percent: Treasury rates fell amid ongoing concerns of a growing debt crisis in Europe. 2012 n 3.95 percent: Refinance volume surged in March and dipped in April, as GSE seller/servicers completed refinancings ahead of a 10 basis point guarantee fee increase that took effect April 1, 2012, mandated by the Temporary Payroll Tax Cut Continuation Act of 2011. n 3.47 percent: 30-year mortgage rates reached new historic lows in September 2012. Refinance volume rose in September as 30-year mortgage rates reached new record lows.
The borrower: Trapped or liberated? There has been some controversy involving HARP 2.0. One concern involves the servicers’ right to set the fees on refinances, such fees being a highly profitable revenue source for servicers. The total revenue has been estimated to be in excess of $12 billion for CY2012. The borrowers who refinance through HARP may save as much as $5 billion in the same timeframe. Since HARP enables borrowers to refinance with existing lenders, there is an opportunity for consumer financial abuse when a lender charges such “captive customers” an above-market interest rate. And, surveys are showing that borrowers who use their existing lenders constitute nearly 75 percent of HARP refinance transactions. The result, from the consumer’s perspective, is that existing lenders and the servicers are in a position to charge considerably higher fees. This takes on an even more potentially pernicious aspect when certain lenders, through their servicing platforms, only permit underwater borrowers to refinance above a specific loan-to-value ratio. There have
been some studies of the increased premium. I have heard a range of 0.25 percent to 0.75 percent premium that is being charged to underwater borrowers. The Obama Administration had wanted the FHFA to use HARP as a means to stem the avalanche of underwater borrowers. These are Fannie and Freddie loans. Yet the FHFA has yet to adequately police the higher rates charged on HARP transactions; indeed, it would seem that the FHFA does not even acknowledge this condition exists. The underwater borrower is still getting a reduced rate through HARP. But it may not be the market rate, and that is the crux of the issue. That difference between the market rate and the rate given to the underwater borrower is all new revenue to lenders. Claiming an increased risk requires an increased rate is not a defensible view, where HARP actually provides lenders with a waiver of liability—which, surely, may be seen as a government subsidy – with respect to representation and warranty claims. Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at jfoxx@lenderscompliancegroup.com.
Footnote 1-Refinance Report September 2012, Federal Housing Finance Agency, 11/28/12. This document may be downloaded from my firm’s Library at www.LendersComplianceGroup.com or from the Federal Housing Finance Agency’s Web site.