New Temporary FHA Conforming Loan Limits Announced!

By Dan Melson on March 6, 2008 12:35 PM | Permalink | Comments (0)

Got an email alerting me to this fact. The e-mail was gobbledegook as far as making any sense but I went to the FHA home page and they had better information.

It appears as if the FHA, through OFHEO, has opted to maximally raise their limits, to 125% of the median sales price in their Metropolitan Statistical Area (MSA). For a very few MSAs, the limit is the legal maximum of $729,750.

For the first time, conforming loan limits are not going to be one number for the 48 contiguous states. This is a very welcome and long overdue development, even if it does make life more complicated. Go to the FHA Mortgage Limits page to find out how much the limits are going to be in your area.

I wrote an article about waiting for the limits and how Fannie and Freddie, and the FHA separately, are going to have to decide what they're actually going to fund. FHA's limits have now been announced, but we're still waiting for Fannie Mae and Freddie Mac are going to react. Keep in mind that they are 98% privately held corporations. They want to stay on Congress' good side because they do have some moral or historical claims on the taxpayer if they get in trouble doing what Congress wants them to do, but the final decision as to what they will fund belongs to them. Now that the FHA has made their announcement, I would look for Fannie and Freddie to be making their decisions as to what they will and will not fund fairly quickly, and that will set the limits as to what a conventional conforming loan is.

Caveat Emptor

UPDATE: I just went the the Credit Union, and not only they but the bank next door are doing something we used to call "Betting on the come" when I was a controller. They're advertising "Jumbo loans for Conforming Rates!" This is fundamentally dishonest. What they're doing is taking applications based upon what they think Fannie and Freddie will do. However, if they guess wrong, they're not going to actually fund the loan, especially given the two percent divergence between conforming and jumbo rates for A paper at the same price. Bottom line: They're trolling for clients with incredibly misleading advertising, and if Fannie and Freddie don't come through according to what these institutions expect, there's going to be a large number of very angry people.

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