Jumbo Loan Limits - Still Waiting

Thanks for checking in folks. Stay tuned on the loan limit increases for Jumbos in our area. Although the HR 5140 bill was signed into law, we still don't have the final word on the increase in Jumbo Loan limits for our part of California. I will post that information as soon as I hear.

BACKGROUND

HR 5140 President Bush signed into law last week a $152 billion economic stimulus bill that will temporarily allow Fannie Mae, Freddie Mac, and the Federal Housing Administration to guarantee mortgages as large as $729,750 in some high-cost markets.

HR 5140, the Economic Stimulus Act of 2008, raises the conforming loan limit for mortgages eligible for purchase or guarantee by Fannie and Freddie to 125 percent of the median home price in high-cost areas, not to exceed $729,750. In areas not designated as high-cost markets, the conforming loan limit will remain $417,000.

The stimulus bill also increases the upper limit for FHA loan guarantee programs in high-cost markets -- currently $372,790 -- to 125 percent of the median home price, with an upper limit of $729,750. The upper limit for FHA-backed mortgages in "normal" housing markets will be increased from $200,160 to $271,050.

Federal regulators have said it will take longer for Fannie and Freddie to draft new credit guidelines and update their systems to evaluate what are now considered "jumbo" loans. The task is complicated by the fact that the new loan limits for high-cost areas will vary according to the median home price in a given county or metropolitan statistical area (MSA).

While HR 5140 is an effort to help the struggling housing market, there is no guarantee investors will accept the jumbo loans backed by Fannie and Freddie. If investors don't purchase the larger loans after they are securitized, that would limit the benefits to the secondary mortgage market and do less to ease the credit crunch than backers of the move have hoped. Mortgage interest rates remain volatile amid all the uncertainty. A cautious approach to float lock decisions may be wise.

Call me if you need help finding someone to talk to about re-financing, or purchase financing.

- Thanks to Ed Fontes for keeping us in the loop on this legislation, Jim