The Federal Housing Finance Agency (FHFA) is expected to announce, as early as next week, the new conforming loan limits for 2010. The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
Currently, as a result of the economic stimulus plan, the conforming loan limit is $417,000 for most areas in the U.S., but $729,750 in high-cost areas, including many in California. The loan limits are set to expire at the end of this year, and could be lowered to $625,500 for high-cost areas. If the current loan limits are reduced to $625,500 for high-cost areas, lenders likely will adjust their loan underwriting standards to align with the new 2010 loan limits, to ensure the loans can be purchased or guaranteed by Fannie, Freddie, and the Federal Housing Administration (FHA).
To ensure consumers are not negatively impacted by the proposed changes, C.A.R. is working with NAR on a one-year extension of the current loan limits, and will keep REALTORS® apprised of the latest developments.