After a fair amount of backlash and letter writing, the government this week raised the mortgage limits for loans guaranteed by the Federal Housing Administration in several high cost California counties, including Santa Barbara CA. The maximum amount of $729,750 will now be allowed for the Santa Barbara area and only time will tell what effect this will have on the housing market here. For many residents here in the Santa Barbara area where the average price of a single family home is over $ 1 Million, this will allow homeowners with high-rate sub-prime mortgages to refinance into federally insured loans. Additionally, it will allow buyers that are out there to obtain better loans for the lower end market.
Overall the market here in Santa Barbara has seen a significant increase in activity during the first 2 months of 2008, with pending sales abound across the board. I have talked with many lenders and Realtors in the last several weeks and the assumption is that this stimulus package will only increase activity in the market.
The Washington AP stated, "The package also includes a temporary increase in the cap on mortgages that the government-sponsored mortgage companies Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) can buy or guarantee from $417,000 to $729,750. The idea is to stoke investor demand for securities made up of more expensive mortgages -- so-called jumbo loans -- backed by Fannie and Freddie, the two biggest mortgage financers in the country. That would drive interest rates lower and spur home buying and refinancing."
Other California high cost counties that received the maximum level for FHA loans are Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Clara, Santa Cruz and Ventura.
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