Fannie Mae and Freddie Mac- Maximum Conforming Loan Limits to Remain Unchanged in 2013
Prospect Mortgage
Shaida Tafreshi – Loan Officer
NMLS #545194
The Federal Housing Finance Agency (FHFA) announced just days ago that the maximum conforming loan limits for 2013 are to remain unchanged from 2012.
Who is FHFA and how do they relate to Fannie Mae and Freddie Mac?
· The Federal Housing Finance Agency is the institution governing Fannie Mae and Freddie Mac. Fannie and Freddie’s sole purpose is to “expand affordable housing” and “bring global capital to local communities to serve the United States Housing Market.”
· What does the above mean? – in simple terms, it means that Fannie Mae and Freddie Mac exist as entities who purchase mortgage backed securities (a pool of loans) from Mortgage Banking Institutions like Prospect Mortgage and other big name banks. FNMA and FHLMC (abbreviation for Fannie Mae and Freddie Mac), in other words, are working on the “secondary market” to purchase funded loans from Lenders and Banks in order to replenish their funds, so they can continue to give out loans, and provide funds for home buyers and borrowers. Without Fannie and Freddie replenishing their funds by means of purchasing bundles of loans (called mortgage backed securities), banks and lenders will simply run out of capital and funds to continue to lend. Fannie and Freddie continue to replenish these funds for us Mortgage Bankers, which is why most lenders must conform to their guidelines in order to lend.
Back to the conforming loan limits:
For most of the nation, the limits will remain unchanged at $417,000 for a 1-unit dwelling. However, in certain areas, such as many towns within Los Angeles, the limits may exceed the conforming amounts in High Cost Areas only. For example, the loan limits in Los Angeles are as high as $625,500 because of the nature of the area and how home prices are higher in Los Angeles relative to other cities in the nation. Because home prices are higher in the city of Los Angeles, the conforming loan limit is adjusted accordingly.
How do loan limits affect interest rates?
· You get the best interest rate when your loan amount is at or under the conforming loan limit. Remember, I’m talking loan amount, NOT purchase price. When you exceed the loan limit, you move into Jumbo Territory, which have different guidelines in themselves. Jumbo Loans must conform to investor specific guidelines, and interest rates tend to be higher for jumbo loans.
As always, please leave your feedback and comments on the subject Press Release!
To find more information about this post and FHFA’s press release, visit www.fhfa.gov
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