The Veridian Blog

Fannie Mae and Freddie Mac are restricted by law, to purchasing mortgages with balances below a specific amount, known as the "conforming loan limit".  Loans above this limit are known as "Jumbo" loans and are purchased by private investors in the secondary market.  2011 will mark the 6th consecutive year that the limit will be set at $417,000.  The new agency that determines the limits is the Federal Housing Finance Agency, a quasi-spin off of the Office of Federal Housing Enterprise Oversight. 

Since early 2008, these limits were further increased for high-cost areas, thus creating a middle tier of loan amounts known as "high-balance" conforming loans.  For every county in the Bay Area, this limit has been $729,750, and will be extended again from December 31, 2010 to September 30, 2011.  Every county's 2011 limits, in fact, will be equal to those that were in effect for 2010. 

The new extension, albeit late in the year, does not come as a total surprise.  Given the listless state of the housing market and overall economic climate, we feel that the expiration of these limits would have certainly placed unwelcome drag on economic recovery.  It would have been an opportunity taken away from many homeowners still trying to take advantage of historically low mortgage rates.