Thursday, February 14, 2008

Listening to economists is often about as useful as listening to the weather report. The bond market didn’t respond positively yesterday to news that retail sales for January were higher than economists expected. February will be a good month for retail sales too if what we’re spending to say “I love you” today is any indication. Americans must really be feeling the pinch of this recession, eh? Unfortunately, that’s bad news for interest rates and we’ve seen increases pretty consistently.

Furthermore, everybody and their dogs are speculating about what will happen in Oregon when the new Fannie Mae loan limits go into effect. So far I’ve heard that Bend and Medford will increase to $430,000 and $425,000 respectively, but nothing on the Portland area. From another source, Oregon isn’t expected to raise limits at all, anywhere. As always, we’ll have to wait and see how it goes. The loan limits are calculated based on median home prices for each area, and in the Portland area we might already be where we need to be.

In other news the Oregon legislature is considering a mortgage reform bill – similar to the one that didn’t pass last year. Most of the line items are pretty straight forward (and for many are standard practice, but need to be legislated for the unscrupulous few) and some of the proposed items are already in place. For instance, brokers already have to disclose their yield spread premiums. But one thing that stands out is the line requiring lenders to verify the income and assets of every borrower – which means no more stated income loans. And there are instances when self-employed people really do have enough income for the loan they’re applying for, but can’t verify it in a way that meets Fannie Mae guidelines for a variety of reasons. Many lenders have stopped doing these “stated income” loans already, but it will really be unfortunate for a lot of high quality loan applicants if they go away altogether.

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