By Dustin R Burke, Adonai Financial

The Associated Press announced that federal regulators will allow Fannie Mae and Freddie Mac to raise loan limits on conforming loans to $729,750.  Is this something we should be excited about?   It sounds great, but there are several things we don’t know yet.

SunTrust Bank put out a statement today about what we know and who will see the increase:

What we know today (expect to see changes)

• The bill sets the FHA and conforming (FNMA/FHLMC) loan limits to the lesser of $729,750 or 125% of an area’s median home sales price. If 125% of an area’s median home sales price is below the current conforming loan limit of $417,000 the $417,000 still applies. You may not feel the benefits, but you will not be any worse off than you are today.

• The FHA and conforming limit changes are meant to be temporary and are set to expire on Dec 31, 2008 (unless extended – which is doubtful).

• The new limits will apply to 30 year and 15 year fixed rate, fully amortizing, and owner occupied.

• ARMs are being considered, but if allowed, the increase will likely apply to one ARM type (forexample, 5/1s).

• FNMA will have other credit overlays including LTV limitations (probably 90% or less).

• The limits will be effective as soon as the bill is signed, FNMA determines pricing.

What do you think about the new conforming loan guidelines?  Do you think it will help?  Send me an email to dustin.burke@adonaifinancial.com.

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Copyright © 2008 Dustin R Burke

Portions Copyright © 2008 Adonai Financial Corporation