The Veridian Blog

We are receiving many calls regarding different Acts, bailout plans and stimulus packages so we thought it would help everyone by clarifying the current and soon-to-be laws and how it affects you:

Former President Bush signed the Economic Stimulus Act into law in March 2008 – this provided for a new middle tiered “high-balance” conforming limit of up to $729,750, or 125% of the median home value in any given metropolitan statistical area (MSA).  This law was a temporary increase to the allowable loan amounts for loans that can be packaged and sold to  the government-sponsored enterprises, Fannie Mae and Freddie Mac (GSE’s).  The provision subsequently expired on December 31, 2008.  Prior to its expiration, the Housing Recovery Act was enacted in August of 2008.  This law provided for a new “high-balance” conforming limit of up to 150% of the current “traditional” conforming loan amount of $417,000, or $625,500 – again, in the nation’s most affluent areas only.  This law extends through 2010 before resetting back to the original $417,000 limit.

So as of today, there are  three distinct pricing tiers based on the following loan amount categories:

$0-417,000 – “Traditional” conforming

$417,001 – 625,500 = “High-balance” conforming

$625,501 and above – Jumbo 

Loans in the first category offer the most attractive interest rates, followed closely by the middle tier.  Anything in the Jumbo category, unfortunately, have few, if any refinancing options due to the disappearance of liquidity in the secondary markets. 

This past Wednesday, President Obama signed into law the American Recovery and Reinvestment Act of 2009.  Out of the 400+ pages, there is a paragraph stating that the high-balance conforming limits will revert back to 2008 levels “pursuant to the Economic Stimulus Act”.  This means that the middle tier “high-balance” conforming limit will increase back to a maximum loan amount of $729,750.  This will ultimately improve the housing market and provide relief to thousands of homeowners who were otherwise stuck in the Jumbo category unable to refinance.

The programs featuring the new limits may not be available for some time.  Last year, it took approximately 6 weeks before the GSEs rolled out the new guidelines, communicated those guidelines to the lenders and for the lenders to exercise their individual risk modules.  We hope it will take less time this year, but at the same time we have to be patient.

The current environment presents new unique challenges almost daily with new legislation, unfounded rumors and extremely volatile interest rates.  When in doubt, please just call and we can hopefully clarify things based on your own individual situation.