By ROBERT DIGITALE
THE PRESS DEMOCRAT
Beginning Saturday, the federal government will withdraw some of its support for the real estate market by scaling back the size of home loans it will guarantee.
The lower loan limits are already making it more expensive for buyers to get mortgages on upscale homes in Sonoma County.
The new rules affect a relatively small segment of Sonoma County’s housing market — mostly homes between $575,000 and $800,000, according to local mortgage brokers. Such properties comprised roughly 10 percent of single-family home sales so far this year.
But buyers of such homes now need to seek jumbo loans, which require them to provide bigger downpayments, accept a higher interest rate and pay more in upfront loan costs.
“Something like this is certainly not helping,” said Norm Valmassoi, a loan officer at First Priority Financial in Petaluma.
Three years ago, Congress attempted to bolster the housing market by increasing the maximum size of loans that can be purchased or guaranteed by the Federal Housing Administration, Fannie Mae and Freddie Mac. But lawmakers, some citing concerns about federal budget deficits, declined to extend the higher loan limits this year.
Although the change does not officially take place until Saturday, lenders already are using the lower limits when processing new loan applications, Valmassoi said.
Under the old limits, buyers could get federally guaranteed loans of up to $662,500 in Sonoma County and $512,500 in Mendocino County. Lake County received a maximum amount of $401,250 for FHA loans only.
The new maximum limit for Sonoma County is $520,950. Lake County’s limit for FHA loans declined to $271,050. Mendocino County’s limit dropped to $373,750 for FHA loans and $417,000 for other federally backed loans.
Kris Anderson, a senior loan consultant with Allstate Mortgage Company in Santa Rosa, said sellers in Sonoma County with homes priced at or above $600,000 may have trouble finding buyers with enough cash to make required downpayments of up to 30 percent of the sales price.
“For those who do have the downpayment,” Anderson said, “it’s going to be a buyers market.”
Otto Kobler, branch manager for Summit Funding in Santa Rosa, said some lenders are responding with what used to be called “piggy-back loans,” essentially a second home-equity loan to cover the difference between the federally-backed first mortgage.
“This will be a new alternative,” he said.
The California Association of Realtors lobbied to keep the higher loan limits. Even so, real estate agents differ on the impact of the new rules.
John Duran, president of the Santa Rosa chapter of the North Bay Association of Realtors, said that amid today’s historically low interest rates, the higher-cost loans won’t prevent sales once more people believe it makes financial sense to buy homes.
“It’s all about confidence,” Duran said. “When people are confident, these little things won’t keep them from purchasing. And when they’re not confident, any little thing will keep them from purchasing.”