The Laborers’ International Union of North America has recommended a bill be introduced in California to exclude homebuilders from mortgage business. They argue that homebuilders in California pressured homebuyers to finance home purchases directly through their owned or affiliated mortgage companies with high-risk loans.

One example cited DR Horton increased its use of subprime lending in Riverside and San Bernardino Counties from six percent in 2004 to 36 percent by 2006. Once subprime loans were gone builders turned to FHA loans for money. A sad statistic shows that 5.5 percent of the government-backed loans from Lennar’s mortgage subsidiary "Universal American" in 2007-2008 have already defaulted. High compared to the 2.8 percent default rate seen within the first two years on the FHA loans the company originated in 2005 and 2006.

Many real estate brokerage firms are also guilty of steering clients to their own in-house mortgage lending firms in order to increase closing rates and subsidize operational expenses. The pressure to originate loans at the behest of the managers and Realtors in these real estate brokerage offices can raise the risk with most mortgages.

The VA Jumbo Loan:

On October 10th, 2008 President Obama signed into law the Veterans Benefit Improvement Act of 2008. The law allows $0 down payment VA loans in certain counties to go up to $729,750 for loans closed through December 31, 2011.

The loan amount can be $729,750 but the purchase price can be much higher. For instance a borrower can purchase a home valued at $1,000,000. and put down the difference between the $729,750 and the $1,000,000.

Most counties around the country though are not in a high cost area and will be limited to a loan amount of $417,000.

Ask your loan officer if you are in a high cost or low cost area.