Home buyers who can’t put at least twenty percent (20%) down usually have to carry private mortgage insurance, often an expensive proposition. One good thing about the insurance, though, is that it doesn’t last forever. Private mortgage insurance protects the lender in the event that a borrower stops making payments before building up much equity in the property. A borrower who diligently pays down a loan, eventually crossing that twenty percent (20%) equity threshold, is no longer considered a big risk, and can expect to be rewarded with cancellation of this requirement. Under the Homeowners Protection Act of 1998, lenders must terminate the insurance after a certain point, something that hadn’t been done consistently before then. The act set the termination date as the point at which the principal balance on the loan is scheduled to reach 78 percent of the original value of the home. In other words, if you buy a home for $100,000 and put ten percent (10%) down, your starting loan balance is $90,000. Once you have paid enough toward principal that the balance reaches $78,000, or twenty percent (20%), the insurance policy should be automatically cancelled. A compliance bulletin issued earlier this month by the Consumer Financial Protection Bureau reminded lenders that automatic insurance cancellation is required even if the value of the home has declined from the original value (in other words, the sales price). The law also creates a way to seek earlier cancellation. The cancellation rules do not apply to the low-down payment loans backed by the Federal Housing Administration as borrowers must pay insurance for as long as they have an FHA loan if the loan was acquired after June of 2013. Read The Full New York Times Article Posted August 30th, 2015

Valley West Mortgage is licensed in California, Colorado, Idaho, Maryland, Nevada, New Mexico, Oregon, Utah, Virgina, and Washington. 2016 Maximum Conforming Loan Limits Established for Fannie Mae and Freddie Mac National Baseline Loan Limit Remains Unchanged; Limits Rise for 39 High-Cost Areas The Federal Housing Finance Agency (FHFA) today announced that the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2016 will remain at existing levels, except in 39 high-cost counties where they will increase. In most of the country, the loan limit will remain at $417,000 for one-unit properties. The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels. The $417,000 loan limit will stay the same for 2016 because FHFA has determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007. The state of Colorado will see the highest increase. In 2015, the Maximum Conforming Loan Limit was $424,350. In 2016, the Maximum Conforming Loan Limit will increase to $458,850. The increase is a grand total of $34,500. HERA provides for higher loan limits in high-cost counties by setting loan limits as a function of area median home value. Although the baseline loan limit will be unchanged in most of the country, 39 specific high-cost counties in which home values increased over the last year will see the maximum conforming loan limit for 2016 adjusted upward. Although other counties also experienced home value increases in 2015, after other elements of the HERA formula—such as the statutory ceiling and floor on limits—were accounted for, these local-area limits were left unchanged. A list of the 2016 maximum conforming loan limits for all counties and county-equivalent areas in the country may be found here. A description of the methodology used for determining the maximum loan limits can be found in the attached addendum. Addendum: Calculation of 2016 Maximum Conforming Loan Limits Under HERA CONFORMING LOAN LIMITS Fannie Mae and Freddie Mac are restricted by law to purchasing single-family mortgages with origination balances below a specific amount, known as the “conforming loan limit.” Loans above this limit are known as jumbo loans. The national conforming loan limit for mortgages that finance single-family one-unit properties increased from $33,000 in the early 1970s to $417,000 for 2006-2008, with limits 50 percent higher for four statutorily-designated high cost areas: Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Since 2008, various legislative acts increased the loan limits in certain high-cost areas in the United States. While some of the legislative initiatives established temporary limits for loans originated in select time periods, a permanent formula was established under the Housing and Economic Recovery Act of 2008 (HERA). The 2016 loan limits have been set under the HERA formula.