Real Estate Finance Alerts

Due to the high level of interest, I will update this post as new information is available regarding the proposed increase to conforming loan limits, a.k.a. non-jumbo loans.

Updated 3/14/07

HUD posted the temporary conforming loan limits for Fannie Mae and Freddie Mac on the HUD web site here. 

NOTE: Enter your state and county then click on the "Limit Type" drop down menu and select "Fannie/Freddie".

Lenders stated they will make the new loan amounts available Monday 3/17/08, but rate information will not be available until lenders publish rates that morning.  As previously stated, the rates are expected to be higher than standard conforming loan limits.

Furthermore, underwriting guidelines will not be published until Monday morning 3/17/08.  

Stay tuned.....

Legislation Summary
Conforming and Non-Conforming Loans

Legislation Summary - Included in the recent economic stimulus plan is a temporary increase to the conforming loan limits. It will take some time to determine the new loan limits and implement the underwriting guideline changes. The increase will vary by market area and be based on median home values as determined by HUD. At this point, the limit increases will expire 12/31/2008. Depending on maximum loan amounts in each area, timing, and potential rate adjustments for the higher loan amounts, the availability and benefit to borrowers remains to be seen.

• The increases are a temporary solution for some high-cost areas based on Metropolitan Statistical Areas (MSAs).
• Loan limits may be as high as $729,750; however, $729,750 will not be the nationwide loan limit. Increases will be available in high-cost areas based on the median area sales prices and will follow the standard HUD mortgage limit calculation process.
• The increase applies to loans originated from July 1, 2007, through Dec. 31, 2008."

Conforming and Non-Conforming Loans - A conforming loan is one that meets the eligibility requirements for Fannie Mae and Freddie Mac. The current conforming loan limit is $417,000 for a 1-unit home. Anything over $417,000 is not eligible for a conforming loan. Prior to the increased level of mortgage defaults, the interest rate difference between conforming loans and non-conforming loans was on average 0.25%. With the higher level of defaults, and the higher risk for non-conforming loans, the rate difference is now on average 1.00%. Home owners who want to obtain a mortgage in excess of $417,000 must either obtain a non-conforming loan and pay the higher interest rate or they can obtain a first loan at $417,000 and a second loan for the remaining balance. However, the second loan will still at a higher rate, about 2.00% higher for a fixed rate compared to current conforming rates. Second loans also have higher underwriting requirements. You can see how increasing the conforming loan limits would enable more people to refinance to a lower interest rate and move from an adjustable to a fixed rate.