Government Announces Conforming Loan Limit Increase

By
Real Estate Agent with Coldwell Banker

 The Office of Federal Housing Enterprise Oversight (OFHEO) announced it has temporarily increased limits on conforming loans offered by government-sponsored enterprises, Fannie Mae and Freddie Mac, from $417,000 to as high as $729,750 in fourteen counties in California for loans originated between July 1, 2007 and Dec. 31, 2008. Fannie and Freddie are reported to be working out new underwriting standards and expect to begin offering the new loans
soon.


Additionally, the government raised the conforming loan limit for mortgages guaranteed by the Federal Housing Administration, and has begun offering the maximum limit of $729,750 for 14 California counties, up from $362,790, for loans originated between now and Dec. 31, 2008.

By raising the conforming loan limit to $729,750 in LA County, we should see a boost in local real estate sales. Buyers that have been sitting on the fence will see a bigger incentive now to purchase with lower interest rates. While the exact rates have yet to be determined, it is presumed that this new ‘conforming jumbo' loan will be 1/2 to 3/4 of a point lower than the existing jumbo rates. This should positively effect the demand for condo sales in the Westwood area, which have been sluggish as of late. This in turn will help make the condo sellers great prospects for move up buyers for single family homes in the area. Effectively increasing the already
strong demand for single family homes in Westwood.

Comments (2)

Find a Notary Public needAnotary
QEC Internet Services - Long Beach, CA

I'm not sure the increased loan limits will turn the market around.  We forget there is a fundamental affordability crisis that the public, real estate community and government do not want to acknowledge. 

Income has remained relative flat for the past 10 years.  Nevertheless, prices on every commodity have skyrocketed and are going to spiral farther out of control.  The wages and earnings of average Americans cannot support the debt service on a 729K loan amount.  There is an imbalance and the typical home above the means of most Americans today.

Jun 19, 2008 04:36 AM
PJ S
Home Inspection Specialist - Los Angeles, CA

on a related note, the preliminary agreement on the "stimulus" package coming out of Washington includes a provision to raise the cap on mortgages Fannie and Freddie can buy to as much as $700,000. Combined with lower mortgate rates this action will provide some help in S.F. to those who bought with ARMs in the last few years- which was most borrowers. I'm not sure it helps many other places except maybe Manhattan. Most other places where this would help- like SoCal- are probably experiencing price declines such that borrowers couldn't refinance any way even if their 600K mortgage would now qualify for much lower rates.

Aug 01, 2008 09:09 AM