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New York Foreclosed Homes Bought with Conforming Loans

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By : John Cutts    99 or more times read
New York foreclosed homes are expected to be sold in greater numbers after the federal government extended its higher conforming limit home loan program until the end of next year.

The conforming loan ceiling of $729,500 was set to expire this year and return to its original ceiling of $625,500. Now, prospective buyers of houses in higher-cost areas such as New York City have a longer time to make their purchase decisions.

Because conforming loans are guaranteed by Freddie Mac and Fannie Mae, lenders are able to provide conforming jumbo loans to buyers of high-priced homes at lower mortgage rates.

Alan Rosenbaum, head of Manhattan-based Guardhill Financial Corporation, the extension of the $729,500 conforming-limit jumbo loan program would have a strong impact on the New York City housing market and other markets that are considered high-cost.

Together with the extension of the federal tax credit program, prospective buyers now of higher-cost residential units have two additional reasons to make their purchases this year or next year, according to Rosenbaum. If buyers find discounted high-end New York foreclosed homes, then they have more reasons to buy.

Lower mortgage rates were also valid reasons to buy for many homebuyers. During the first week of November, according to Rosenbaum, lenders in the New York area were charging mortgage rates slightly lower than 5 percent for 30-year fixed-rate conventional mortgage loans lower than $417,000, the previous ceiling for conforming loans.

For mortgage loans from $417,000 through $729,500, the mortgage rates were around 5.25 percent while jumbo loans above $729,500 are provided by lenders at around 5.7 percent.

According to Rosenbaum, some lenders also require bigger down payments and higher cash reserves for jumbo loans. Some banks also require that condo or co-op units priced higher than $729,500 are located in condo or co-op complexes with occupancy rates of 75 percent or more.

David Adamo, CEO of Connecticut-based Luxury Mortgage, said that the extension of the conforming loan limit program will rejuvenate the high-end housing sector of New York City. He expects jumbo loans to have lower mortgage rates in the next months as investors step up their demand for securities backed by mortgages because of the extension of the $729,500 conforming limit program.

According to Adamo, lenders issued jumbo loans totaling around $500 billion in 2006 and issued only around $100 billion last year. He expects the jumbo loan total to increase next year.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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