A Jumbo Question: Conforming Loan Limits

A Mortgage Porter reader asks a very timely question regarding the proposed conforming loan limit:

"I just spoke to one of the major lending institutions and he recommended that if I can wait 3 – 4 weeks we may see a change in the non conforming guidelines such as amount that is normally set t $417,000 jump to either $620,000 or $630,000. 

Would you have any information on these possible changes and time line?"

Many people are full of questions regarding what’s going on with the conforming loan limit.  Different figures and stats are being quoted from various sources.

The Certified Mortgage Planning Institute issued this statement yesterday:

CMPS Legislative Update – Higher loan limits inching toward reality!

Yesterday, the US House of Representatives overwhelmingly passed HR 5140 – an economic stimulus package that includes a temporary increase in the conforming loan limit and the upper threshold for FHA loan programs to as much as $729,750 in high-cost areas.  The temporary increase would last only until the end of 2008.  The bill would also restrict Fannie Mae, Freddie Mac and the Federal Housing Administration from guaranteeing or purchasing loans above 125 percent of the median home price for a given area.  That means that the existing $417,000 conforming loan limit for mortgages eligible for purchase by Fannie and Freddie would not increase in areas where the median home price is $333,600 or less.  The problem of course, is that as of right now, no one knows what the median home price is in different markets because this data has never been published by HUD!

Therefore, it would be up to the Secretary of Housing and Urban Development to determine the median home price for different housing markets "as soon as practicable," but no later than 30 days after passage of the bill, relying on existing commercial data where needed.  In other words, if median home prices in your marketplace are $336,000 or less, this bill won’t really affect you; and there’s no way to tell if median home prices in your area are higher than $336,000 until HUD publishes this data.  Nevertheless, jumbo relief is certainly on the way for places like California where median home prices are certain to be above $336,000.

Currently, the loan limit for FHA loan programs is between $200,160 and $362,790, depending on the county where the property is located.  The proposed higher limits for FHA loan guarantees are also set to expire at the end of this year, unless Congress passes other legislation intended to modernize FHA programs by introducing risk-based pricing and lowering down-payment requirements.

While House leaders thought they had reached an agreement with the Bush administration to include FHA modernization as part of the stimulus package, they agreed to continue working on that issue separately at the administration’s request, the Associated Press reported.

In order to make higher limits a reality, the next step is for the Senate to pass the bill and for the President to sign it into law.  The target date for final passage set by the White House and Congressional leaders is February 15, so let’s hope for the best and we’ll be sure to keep you posted as we have more information.

Sources and helpful links:

·          Inman News

·         HR 5140

·         FHA Loan Limit Search – (Current Limits)

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