RTC Mortgage Blog

$729,750 Loan Limit is NOT Permanent!

March 10th, 2011 11:08 AM by Richard T. Cirelli

$729,750 Loan Limit is NOT Permanent!


I want to remind everyone that the current Fannie Mae, Freddie Mac and FHA loan limit of $729,750 in certain high-cost markets such as Orange and L.A Counties is not permanent and are likely to be lowered soon.


For Conventional Conforming loans, The Housing and Economic Recovery Act of 2008 changed Fannie Mae and Freddie Mac’s charter to expand the definition of a "conforming" loan through 2009. Congress later extended the deadline to October 1st, 2011. Two sets of limits were provided for first mortgages – “general” conforming loan limits which are currently $417,000, and “high-cost area” conforming loan limits which can be as high as $729,750 for a single-family home, depending on the median price of a home in certain designated markets.


FHA loans, which are regulated by HUD (U.S. Department of Housing and Urban Development) as opposed to Fannie and Freddie who are regulated by the Federal Housing Finance Agency. Therefore, while the FHA loan Limits are the same as Fannie Mae and Freddie Mac’s, they don’t necessarily have to change at the same time nor to the same amount.


FHA is expected to make an announcement on April 18th that is projected to lower the limit to $625,500 in high-cost markets. Fannie and Freddie will probably wait until we are near the October 1st deadline before making their announcement.


Why Are the Loan Limits Likely to be Lowered?


At the time Congress and HUD originally approved the higher limits for higher-priced markets we had absolutely no jumbo lenders or loan programs. The collapse of the financial markets literally destroyed the credibility of the Mortgage-Backed Securitas (MBS) market that lenders relied on to originate all types of loans, bundle them with others and sell them to investors. With no loans available above $417,000 to help our high-priced markets the Government temporarily increased the limits.


Now, we have private Jumbo lenders and loan programs to rely on that provide financing well beyond the $729,750 limit of Fannie Mae, Freddie Mac and FHA. Take a look at the sample rate chart below. Loan amounts to $2 million and higher are readily available and at great rates. Yes, the rates are a little higher than Fannie, Freddie and FHA’s but they are still GREAT rates.


Mortgage Rate Update:


Mortgage rates improved a little over the past week or two primarily due to continued unrest in Libya and an overbought stock market that may be correcting. As money flows out of stocks, it typically flows into safer investments such as Treasury Bills and Notes and Bonds, including Mortgage-Backed Securities.
Posted in:General
Posted by Richard T. Cirelli on March 10th, 2011 11:08 AM



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