For Immediate Release

NEW LOAN LIMITS MAY STIMULATE HOME SALES IN THE GREATER DANBURY AREA

ERA Goodfellow Homes Scott Cooney Available to Discuss New Conforming Loan Limits and Overall Housing Market in Greater Danbury Area

Danbury, CT (Feb, 19^th 2008) – ERA Goodfellow Homes applauds and looks forward to the anticipated positive impact the new economic stimulus package recently signed into law by President George W. Bush will have on our local real estate market.

With the government raising the FHA conforming loan limit for all homes bought through the end of this year, much larger mortgages will qualify for purchase by government housing authorities Fannie Mae and Freddie Mac, lowering the interest rates for borrowers. As a result, buyers and existing homeowners can get lower interest rates on what used to be known as ‘jumbo loans’ that were resulting in higher percentage point more than conforming loans.

“This new government stimulus package presents a great opportunity for a consumer to purchase their “Dream Home” or allowing existing homeowner to strengthen their financial position through refinancing.” said Scott Cooney, President of ERA Goodfellow Homes. “Our 2007 national senior survey clearly shows that boomers will look to take advantage of this situation. We found that one-in-five boomers plan to change houses in the next five years. With our skilled agent base, we are available to work with the consumer on every available option and use this ruling to help explore the opportunities.”

Here are our suggestions on how home buyers can take advantage of this change in the home buying/selling climate:

• If you are going to be in a home for more than two years, now is the right time to buy. Prices may still move lower this year, but based on statistics compiled by NAR*, they are expected to go back up before you plan to sell and you can take advantage of the more favorable mortgage rate.
• Get pre-qualified for a mortgage as soon as possible so you can make an offer before someone else does – more people will be out shopping for homes in a higher price range.
• If you saw a dream home you couldn’t afford last year, look again. Two trends are moving in the buyer’s favor – the price may have dropped and you will be able to afford a bigger mortgage at a lower interest rate.
• Sellers should not hold back at a time when more buyers are becoming qualified to get a larger mortgage. This program may not continue beyond this year.
• Timing the market is not possible. While you may have to sell for less than you would have received a year ago, you’ll make it up on the lower purchase price of your next home and lower financing costs.

According to NAR research:

· Increasing FHA loan limits will help an additional 138,000 Americans achieve the dream of homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home.

· NAR believes that increasing the loan limits for Fannie Mae and Freddie Mac will bolster the severely stressed housing finance market by immediately infusing much needed liquidity into the nation’s mortgage market. “While such an increase will not solve the full range of housing challenges, it will play a vital role in improving the nation’s economy and making the dream of homeownership more attainable for thousands,” said NAR President Richard Gaylord.

· An economic impact study conducted by NAR earlier this month estimated that increasing the GSEs’ (Fannie Mae and Freddie Mac) conforming loan limits would result in as many as 500,000 refinanced loans and could help reduce foreclosures by as much as 210,000.

· In addition, over 300,000 additional home sales could be generated, housing inventory would be reduced and home prices would be strengthened by two to three percentage points. “These are real results and will have an immediate and sustainable impact for families across our country,” said NAR President Richard Gaylord.

* NAR Hails Passage of Economic Stimulus Package to Help Jumpstart Housing Market; available: http://www.realtor.org/press_room/news_releases/2008/nar_hails_passage_of_stimulus_package.html

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2. Key Provisions of the Bill (Source: NAR)

Note these are temporary increases that expire on December 31, 2008.
I. FHA
The mortgage limit provisions include four temporary changes for the FHA
program. (As a reminder, the FHA modernization bill includes higher mortgage limits.
It is possible that legislation could make this provision permanent or limit the FHA maximum limit to $417,000 as the Senate bill does.)

*Raises the base loan limit ("floor") to 65% of the current GSE limit ($417,000) = $271,050. This provision is effective the day the President signs the bill.

*Raises the maximum FHA loan limit from $362,750 to $729,750 (175% of GSE limit $417,000)

*Secretary has the discretion to raise the maximum loan limit by $100,000 in an area at the $729,750 limit for any size residence (including 2-4 family units).

Only "high cost areas in California and Hawaii (Honolulu) are likely to increase to the $729,750 maximum. Washington D.C., for example, will increase to about $600,000 based on our analysis of available data. See spreadsheet for estimated limits. While we developed these limits following the FHA mortgage limit methodology, they are subject to possible change. At your discretion, we do believe that you can start taking applications at the higher figures w/ the appropriate caveats.

*Increases the calculation factor from 95% to 125% of area median sales price for determining "high cost" areas. We have an updated list of affected areas.

*Implements Fannie Mae/Freddie Mac ratios for calculating maximum loan amounts for two-, three- and four-family units in all of the above categories. Fannie Mae and Freddie Mac two-, three- and four family unit properties increase the same percentage that the single family limit increases. In 2006, the GSE single family limit increased 15.95% and the mortgage limits for multiple units increased 15.95%.

This change should result in a significant increase in FHA limits for multi-unit properties. In the past, FHA used fixed percentages of the single family limit (i.e. 107% of single family for two family unit, 130% for three-family unit and 150% for four-family units). For example, under the new provision, if the single family limit increases slightly over 100% in a "high cost area" (from $362,790 to $729,750), we would assume the multiple unit amounts would increase the same percentage (slightly over 100%).

II. Fannie Mae & Freddie Mac
The bill raises the GSE maximum loan limit to $729,750. The bill states that the GSE limits should follow the HUD mortgage limit calculation process and therefore the GSEs and FHA will have the same limits in areas that exceed $417,000. Fannie Mae and Freddie Mac's current limit will, in effect, become their "floor" ($417,000). As the attached chart demonstrates, there are a number of markets that will benefit from this change to the GSE mortgage limits though not as many as NAR advocated. NAR will continue to advocate for broader expansion of the loan limits. Since this is a new process for the GSEs, we would recommend waiting until the maximum limits are announced for Fannie Mae and Freddie Mac.
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3. Markets affected by new loan limits – estimates provided by NAR based on HUD data, but subject to change .

4. Stimulus Package Talking Points

• More loans available so more people can buy . Fannie Mae and Freddie Mac, government backed loan agencies, guarantee mortgages, which make the mortgages attractive on the secondary loan market. Increasing the Freddie and Fannie loan limits means more mortgages will be able to be guaranteed, hence increasing the number of loans available and increasing the number of people able to engage in a housing transaction this year. Increased activity in the housing sector will have a positive impact on the economy.

• Less expensive loans reduce monthly payments . Previous loan limits kept many people from buying homes in higher priced areas because loans exceeding the $417,000 limit are subject to higher “jumbo” loan rates. With the passage of the stimulus package, people in higher priced areas can obtain less expensive loans, reducing their monthly payment by (insert an example here of the difference a one percent less mortgage rate would make on the monthly repayment of a loan figured at your region’s median sale price) saving them tens of thousands of dollars over the life of the loan.

• Act now. These loan limits are only intended to be in effect through the end of the year. Combined with the low mortgage rates, this is clearly the time to act.

• More FHA loans available . The increased loan limits for the FHA program will afford eligible buyers with an opportunity to qualify for a conventional loan. NAR estimates that increasing FHA loan limits will help an additional 138,000 Americans achieve homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home.

• Refinancing can save hundreds of dollars per month. Nearly half a million people with higher priced jumbo loans will be able to refinance to conforming loans under the provisions of the bill, saving these people $274 to $411 a month, according to NAR estimates.

• Higher loan limits should kick start the housing market. NAR estimates that increased loan limits will help generate additional home sales, thereby reducing inventory and strengthening home prices by two to three percentage points.
  
  
• Positive growth in the housing market is good for the economy . Real estate accounts for approximately 20 percent of the GDP.
  
  

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5. According to NAR Research:

· Increasing FHA loan limits will help an additional 138,000 Americans achieve the dream of homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home.

· In addition, NAR believes that increasing the loan limits for Fannie Mae and Freddie Mac will bolster the severely stressed housing finance market by immediately infusing much needed liquidity into the nation’s mortgage market. “While such an increase will not solve the full range of housing challenges, it will play a vitally important role in improving the nation’s economy and making the dream of homeownership more attainable for thousands,” said Richard Gaylord, NAR President.

· An economic impact study conducted by NAR earlier this month estimated that increasing the GSEs’ (Fannie Mae and Freddie Mac) conforming loan limits would result in as many as 500,000 refinanced loans and could help reduce foreclosures by as much as 210,000.

· In addition, over 300,000 additional home sales could be generated, housing inventory would be reduced and home prices would be strengthened by two to three percentage points. “These are real results and will have an immediate and sustainable impact for families across our country,” said Richard Gaylord, NAR President.

· FHA mortgages are used most often by first-time homebuyers, minority buyers, low- and moderate-income buyers, and buyers who cannot qualify for conventional mortgages because of high loan-to-value or payment-to-income ratios. Despite its successes as a homeownership tool, FHA is not a useful product in high cost areas of the country because its maximum mortgage limits have lagged behind the median home price in many communities. As a result, working families such as teachers, police officers and firefighters are unable to find and purchase housing in the communities where they work. Increasing the FHA loan limits will allow the FHA program to keep pace with home price appreciation that is constantly occurring in all markets of the country.

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6. Stimulus Package Source Documents

Jan. 17 – NAR Press release

http://www.realtor.org/press_room/news_releases/2008/stimulus_package_must_include_loan_limit.html

Jan. 17 – letter from NAR to Hon. Nancy Pelosi

http://www.realtor.org/fedistrk.nsf/files/letter_cll_pelosi.pdf/$FILE/letter_cll_pelosi.pdf

Jan. 29 – NAR Press release

http://www.realtor.org/press_room/news_releases/2008/nar_says_economic_stimulus_legislation.html

Feb 7 – NAR Press release

http://www.realtor.org/press_room/news_releases/2008/fannie_freddie_reform_impact_housing.html

Feb. 8 – NAR Press release

http://www.realtor.org/press_room/news_releases/2008/nar_hails_passage_of_stimulus_package.html

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7. Glossary of Terms

Conforming Loan: Fannie Mae is authorized by the United States Government to purchase residential mortgage loans. Fannie Mae worked with Freddie Mac to develop uniform mortgage documents and national standards for what would come to be known as a conforming loan . When Fannie Mae announces that it will buy a certain type of loan, local lending institutions often change their own regulations to meet the stated criteria.

Fannie Mae: Formally known as the Federal National Mortgage Association (FNMA), Fannie Mae is a privately owned corporation that provides a secondary market for mortgage loans. Fannie Mae sells government-guaranteed FNMA bonds at market interest rates in order to raise funds to purchase loans. FNMA is the nation’s largest purchaser of mortgages.

Federal Housing Administration (FHA): The FHA operates under the Department of Housing and Urban Development (HUD), and does not build homes or lend money itself. Rather, the FHA insures low-down-payment mortgages on real property made by approved lending institutions. It does not insure the actual property, but it insures the lender against loss. The term FHA loan , then, refers to a loan that is not made by the agency, but is insured by it. A loan guarantee by the FHA states that a percentage of the loan will be underwritten by a mortgage company or banker.

Freddie Mac: Also known as the Federal Home Loan Mortgage Corporation, Freddie Mac is a subsidiary of the Federal Home Loan Bank system. Freddie Mac has the authority to purchase mortgages, pool them, and sell bonds in the open market with the mortgages as a security.

Government Sponsored Enterprise (GSE): The government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The goal of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors: agriculture; home finance; and education. Fannie Mae and Freddie Mac are two of the mortgage finance GSEs.

Jumbo loan: A jumbo loan refers to a mortgage with a loan amount above the industry-standard definition of conventional conforming loan limits. This standard is set by the Fannie Mae and Freddie Mac. The average interest rates on jumbo mortgages are typically greater than is normal for conforming mortgages, and vary depending on property types and mortgage amount. Loans above the conforming limits may be offered by seller servicers of these wholesale institutions, as well as Wall Street conduits who provide warehouse financing for mortgage lenders.

Metropolitan Statistical Areas (MSAs): This is the formal definition of a metropolitan area, as set forth by the Office of Management and Budget. MSAs are delineated on the basis of a central urbanized area—a contiguous area of relatively high population density.

Nonconforming Loan : A buyer who wants to place a jumbo loan would search for a lending institution that is making portfolio loans —lending its own money and taking mortgages it intends to hold in its own portfolio without selling them to secondary investors. These portfolio loans are known as nonconforming mortgages because they do not have to meet uniform underwriting standards and can be flexible in their guidelines.

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8. FAQs

Economic Stimulus Package

Questions & Answers

1. What is the legislation, specifically?

The stimulus package temporarily raises the maximum size of mortgages that government-sponsored mortgage companies (Fannie Mae and Freddie Mac) can buy and market as securities from $417,000 to as high as $729,750 in the most expensive markets, and within that range in less expensive markets. By increasing the Freddie and Fannie loan limits, more mortgages will be able to be guaranteed, hence increasing the number of loans available and the number of people able to engage in a housing transaction this year.

2. What are the potential benefits of the economic stimulus package to me as a homebuyer?

Homebuyers needing bigger loans typically have had to apply for jumbo loans that carry a higher interest rate than “conforming loans” and tougher qualification requirements. Raising the conforming loan limit from $417,000 to as high as $729,750 in some market areas will allow more people to buy homes at a lower interest rate. The conforming loan limit will be tied to the market area’s median home price, which is set by the Federal Housing Administration.

3. How do I benefit as a home seller?

Home sellers can benefit from a larger pool of buyers who will be able to get bigger loans at lower interest rates. Therefore, a buyer who couldn’t afford to buy your home last year may now be able to do so.

4. How do I benefit as a homeowner?

Homeowners with non-conforming or jumbo loans also could benefit because they could refinance a large existing mortgage into a new conforming loan that carries a lower interest rate. Nearly 500,000 people with higher priced jumbo loans will be able to refinance to conforming loans under the provisions of the bill, saving these homeowners $274 to $411 a month, according to estimates by the National Association of Realtors® (NAR).

5. Will this help me if I have issues with my credit?

The increased loan limits for the Federal Housing Administration (FHA) program will afford people with possible credit issues an opportunity to qualify for a conventional loan. NAR estimates that increasing FHA loan limits will help an additional 138,000 Americans achieve homeownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home.

6. Will this help me if I am at risk of foreclosure?

It could help some homeowners who couldn't refinance under the conforming loan limit of $417,000, unless their credit is already impaired. An economic impact study conducted by NAR earlier this month estimated that this increase in conforming loan limits would help prevent as many as 210,000 foreclosures. On Feb. 12, U.S. Treasury Secretary Henry Paulson announced steps to help borrowers in danger of foreclosure stay in their homes by offering a 30-day freeze on some foreclosures while loan modifications are considered. Several major banks have agreed to participate.

7. Could this affect home prices?

Home prices could be strengthened by two to three percentage points, NAR reports. And more than 300,000 additional home sales could be generated nationally and housing inventory would be reduced.

8. When will I know the exact conforming loan limits for my area?

The U.S. Department of Housing and Urban Development is planning to announce the conforming loan limits for different parts of the country in early March. In the meantime, lenders are expected to approve some loans in anticipation of what the new limits might be.

9. For what period of time will this legislation be in effect, and why is it temporary?

According to the legislation, eligible loans must be made between July 1, 2007, and Dec. 31, 2008, when the conforming loan limits would revert to existing levels, unless Congress extends the cutoff date. This legislation is for a temporary period of time as a means to stimulate the economy as much as possible, creating in effect a strong call to action. Combined with existing low mortgage rates, this is clearly the time to act.

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9. Positive Angles – Financial Impact of Rate Reductions

Feb. 8, 2008 Issue No. 19

The recent interest rate cuts and subsequent reductions in mortgage rates have significantly improved potential home buyers’ ability to afford a home.

Ø The impact of a 1% reduction in interest rates on a $250,000 home
(assuming the buyer used the same down payment):

o With 80% financing, a buyer could purchase a home that cost 9% more

o With 60% financing, a buyer could purchase a home that cost 7% more

Ø The impact of a 1.5% reduction in interest rates on a $250,000 home
(assuming the buyer used the same down payment):

o With 80% financing, a buyer could purchase a home that cost 14.5% more

o With 60% financing, a buyer could purchase a home that cost 11% more

-more-

Using a $250,000 home as an example, the two charts below demonstrate how much more a buyer could afford (in dollars and in percentage) based on the change in rates and the amount of a down payment.

The two charts below demonstrate affect a various rate decreases would have on monthly payments.