Increase in Conforming Loan Limit

Read what Inman News has to say about the increase in the conforming loan limit below. To summarize, if you have a jumbo loan and live in a high-cost area, you may want to consider refinancing under a conforming loan with the new limit increase before the end of the year.

The economic stimulus package includes a provision that will temporarily raise the conforming loan limit to allow Fannie and Freddie to purchase or guarantee many jumbo mortgages originated between July 1, 2007, and Dec. 31, 2008.

The increase, to as much as $729,750 in high-cost areas, will also apply to Federal Housing Administration loan guarantee programs. Because the increase will be capped at 125 percent of the median home price for an area, the conforming loan limit will remain at $417,000 in markets where the median home price is $333,600 or less.

Although the increase will expire at the end of the year, industry groups like the National Association of Realtors have urged Congress to mandate a permanent increase in the conforming loan limit in passing legislation to increase oversight of Fannie and Freddie.

Permanent changes to FHA loan limits are being addressed in bills that would also lower minimum down-payment requirements and expand the pool of eligible borrowers by using risk-based pricing. Both the House and Senate have passed FHA modernization bills, but differences between them are being ironed out (see Inman News story).