NEWS – Changes in Conforming Loan Limits on the Horizon

There’s been a lot of talk in the news lately about the conforming loan limits on mortgages being lowered.  This affects all buyers, but in particular those in high price areas like the San Francisco Bay Area, where they will face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011.

Despite the Obama administration claiming it will support a one-year extension of the current higher loan limits, on July 1st Bank of America lowered their loan limits for all new loans and other banks will soon follow suit.


The current loan limits have been in place since February of 2008, when they were passed as part of the Emergency Stimulus Act.  Housing conditions have not improved enough to warrant letting the limits drop. Unless Congress acts, these loan limits will drop to 115% of the local area median home price.  For the San Francisco Bay Area the decline in loan limits would be more than $104,000 from the current loan limit of $729,750 to $625,500.

Housing Markets are Rebounding, but the Recovery will be Slow.

With tight underwriting constraining mortgage availability, lowering the FHA/Fannie/Freddie loan limits will only further restrict liquidity. Even with the current higher limits, borrowers are finding it more and more difficult to obtain affordable mortgage financing. Making the current limits permanent at levels appropriate in all parts of the country will provide homeowners and homebuyers with safe, affordable financing and help stabilize local housing markets.  It will allow homebuyers in higher cost areas (such as the San Francisco Bay Area) to have access to affordable mortgage financing and not find it necessary to fall into a Jumbo Loan category with even higher interest rates.

The Caton Team, as well as other REALTORS® nation-wide, have contacted Congress and communicated clearly that a housing recovery depends on keeping mortgages affordable and that Congress needs to prevent these lower loan limits from taking effect.

We’ll keep you posted on what transpires as the weeks progress.  We’ve got our fingers crossed too.

We are dedicated to our industry and making the American Dream of home ownership attainable for all.  What can we do for you?

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