"What goes around comes around" might apply to conforming loans (called "conforming" because they conform to certain guidelines and requirements of government or quasi-government organizations such as Freddie Mac and Fannie Mae).
Conforming mortgages are limited by the size of the loan, based on "typical" housing costs from around the nation. Currently, the conforming limit on a single-unit property is $417,000.
Congress authorized increases in the conforming loan limits in 2008 in "high cost" areas, as part of the Economic Stimulus Act of 2008. For example, in Los Angeles County, a mortgage could go up to $729,750 and still qualify as a conforming loan.
On January 1, 2009 those temporary increases were rolled back to a maximum of $625,500. But that was not the end of the story. The American Recovery and Reinvestment Act of 2009, which was signed into law this week, put conforming loan limits in high-cost areas back to their higher 2008 levels.
Check out the text on the bottom of page 111 of 407.
These changes have an impact on the real estate market, beyond those who actually live and buy in neighborhoods that are considered "high-cost". Why? Because conforming mortgages offer the widest selection of home loan products, and often at the lowest rates. The widespread availability of these mortgage products helps to support home sales nationwide. They also can provide more refinancing options for people that need it.
Lenders may either not yet be fully aware of these change, or not yet on top of how they will react, but they will start learning and responding in the near term. Once they do, more homeowners should see a favorable impact on financing costs.
If you'd like to find your neighborhood's conforming loan limits, go to the HUD Web site. Of course, if you have specific questions related to your home or an upcoming purchase, contact me directly anytime. We are always here for you.
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