The Veridian Blog

After much speculation and surmise, the 2009 conforming loan limits, were released by the Federal Housing Finance Agency (FHFA) last week, as follows:

     1-unit properties : $417,000

·              2-unit properties : $533,850

·              3-unit properties : $645,300

·              4-unit properties : $801,950

See: http://www.fhfa.gov/GetFile.aspx?FileID=135

Look familiar?  If so, it’s because these limits have not changed since 2006.  However, maximum conforming loan limits don't apply to all housing markets equally.  There are 59 regions in the United States (mostly in California) designated by the government as "high-cost" that get the benefit of higher loan size limits based on typical home prices throughout the region based on the Housing and Economic Recovery Act of 2008 (passed just this summer).  These limits are set equal to 115 percent of local median house prices and cannot exceed 150 percent of the standard limit, which is $625,500 for one-unit homes.   

Of course, this has long been the case way back in March: http://www.ofheo.gov/newsroom.aspx?ID=425&q1=0&q2=0.  But because of the expiration of the current temporary conforming loan limits set earlier this year through the Economic Stimulus Act, most high-cost areas will experience a reduction in the amount of loans eligible to be sold to the GSE’s.  In the Bay Area, the current limits run up to $729,750 and now will be reduced by over $100,000 to $625,500.  That means many more homeowners will be left with only one option of applying for Jumbo loans, which nowadays means at least a 1.0% premium in mortgage rates.