I’m noticing that a lot of Mortgage Porter readers are finding my by googling various terms to learn more about when and how the conforming loan limits will be increased.
Here’s what I know (and what I’m speculating) so far:
I’ve heard that President Bush will be signing the bill into law this Wednesday. Then HUD has 30 days to publish what the median home prices are for various areas. The new conforming loan limit will be based on 125% of those values.
It’s estimated in the Seattle-Bellevue-Everett area, our new loan limit will be just shy of $500,000.
While this process is taking place, Fannie and Freddie need to figure out how they’re going to deal with this influx of new business. Underwriting guidelines will need to be considered and distributed to lenders. Also, I will eat a shoe if there are no "add to rate" to loan amounts $417,001 and over. I’m estimating the add will be 0.25% – 0.50% to the now conforming rate. For example, if your loan amount is $417,000 your rate for a 30 year fixed could be 5.500% – if your loan amount is $417,001 your rate would be 5.75% – 6.00%. This is still more attractive than what the current jumbo rates are.
Remember, the increase to the conforming loan limit is temporary. It is currently only valid through the end of 2008. Who knows, maybe Congress will extend it as they have the PMI deduction if they see it as a benefit to the American economy.
You can see this process will take a little time. I’m assuming that Fannie and Freddie are diligently working on the guidelines/pricing issues and not waiting for HUD’s home value information. Even so, it could very well be some time in March before this all takes place.