Conforming Loan Limits Set to Expire

This is a piece Carol Wolfe of Rodeo Realty’s Encino office wrote for back in August. The original story can be viewed at: Some other resources on the subject were added for this blog post. Here it is:

Unless Congress acts, the current conforming loan limits will expire on Sept. 30, and the cost of a mortgage could rise significantly.

More than 30,000 California families will face higher down payments, higher mortgage rates and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac are reduced beginning Oct. 1, according to analysis by the California Association of REALTORS® (CAR).

The Los Angeles Times wrote a piece on the issue today. Read quotes from Rodeo Realty’s Syd Leibovitch at:,0,7797548.story

Despite the Obama administration saying it will support a one-year extension of the current loan limits, said Wolfe, Bank of America has already lowered its loan limits for new loans, and others are expected to follow suit.

This is potentially a big deal for home buyers and sellers here in the Los Angeles area! Many buyers will be looking at higher down payments, higher mortgage rates and stricter qualification requirements.

Government-sponsored enterprises such as FHA, Fannie and Freddie buy and guarantee mortgages. That government guarantee allows buyers the opportunity to pay less money down than conventional mortgages, because it reduces lender’s risk.

In 2008, Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them annually through fiscal year 2011, according to CAR. This has been an effort to spur home buying in a tough economy.

I agree with CAR’s stance that higher loan limits are an essential part of the housing market recovery. And I support the association’s efforts to urge Congress to maintain the current limits and make them permanent. Congress is the only body that can extend the program.