We’re starting off the new month with some great news from Washington, DC today that we wanted you to hear from us first.
Late yesterday, President Obama signed a resolution that included a provision extending through fiscal year 2011 the current conforming loan limit of $729,750 for high-cost areas, including many in California. The same limits will also be extended to loans insured by the Federal Housing Administration.
The Obama administration recognizes the need for such an action so that the housing market can recover. Without the extension, which was set to expire at year’s end, FHA loan limits would have dropped by as much as 50 percent in some areas, and the conforming loan limit would have dropped by about 40 percent.
As a result of C.A.R.’s and NAR’s efforts, a provision of the Housing and Economic Recovery Act of 2008 included temporarily raising the conforming loan limits from $417,000 to $729,750 in high-cost areas and extending the limits through 2009. Yesterday’s actions effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through Sept. 30, 2011.
The conforming loan limit determines the maximum size of a mortgage that government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.” Non-conforming or “jumbo loans” typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.