Ed's Blog

During my VP work at the California Association of Mortgage Brokers, we have advocated for a number of solutions to help alleviate the current mortgage crisis. One of these is aimed at providing more loan options and liquidity for Californians. At a press conference on August 16, 2007, here’s what we asked Congress to do:

“Declare California a high cost state so borrowers can have equal access to federally backed loans. In order for tax paying California borrowers to have the same access to federally backed loans as all Americans, CAMB strongly supports the following regulatory changes:

A. CAMB calls upon Congress to declare California a high cost state, just like Alaska and Hawaii- in order for the confirming loan limit to keep pace with California's median housing price. Housing prices remain at considerably higher levels than the current conforming loan limit of $417,000, and therefore puts home ownership out of reach for many hard working California families.

B. FHA guidelines must be reformed and updated to increase consumer access to these products.

C. FHA loan limits must mirror conforming loan limits to increase loan opportunities for borrowers with less than perfect credit or unique employment circumstances.

(Note: CAMB believes that the lack of FHA accessibility is a major reason why so many Californians chose sub-prime loans to achieve home ownership.)”

For Californians, the most important issue at the moment is declaring California to be a high cost state. Let me explain. Designating California as a high cost state would allow conforming loan limits to be raised from $417,000 to $625,500.

The significance of this is two fold. First, conforming interest rates are lower than jumbo loan rates. These days, a lot lower. As much as 1% lower. On a loan of $625,000 this rate difference translates to $4,966.05 per year and $148,981 for 30 years. That's a lot of money! Second, in addition to the savings, this would help provide more liquidity in the market, thus making it easier to get a mortgage.

So, why do I tell you all of this now you ask? Because the House has passed HR1427 which would enable this change. It's now with the Senate, going through committees. I would like to urge you to contact our Senators and let them know that this is a change that is good for California home owners and home buyers. As a matter of fairness, California should have the same access to conforming loan products that borrowers in other states do. Let's put Californians on a level playing field with the citizens of other states.