O.C.’s conforming loan limit drops 14%

November 7th, 2008, 1:54 pm · 8 Comments · posted by Mathew Padilla

A government regulator said today the maximum size of a loan that mortgage giants Fannie Mae or Freddie Mac can purchase will drop 14 percent to $625,500 on Jan. 1, 2009 in Orange County and other high-cost areas.

Interest rates are lowest on loans that can be sold to Fannie and Freddie, known as conforming loans.

However, some brokers say lenders have continued to offer the best rates on loans up to the old conforming limit of $417,000 and that rates are higher on loans greater than $417,000 and up to the current maximum of $729,750, which was established to alleviate the credit crunch.

Brokers expect that to continue next year, meaning rates will be higher on loans between $417,000 and $625,500, and even higher for loans greater than $625,500.

Read the release on the new limit HERE.

And in other mortgage news…

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Posted in: Loan underwriting • Meltdown

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lee in irvine says:

November 7, 2008 at 5:16 pm

It’s too bad that they didn’t drop the conforming loan limit for Ca down to $417,000. This is just another attempt by the gov’t to artificially support values in vastly overpriced Ca.

Oh well … it really doesn’t matter because prices are still gonna continue to decline.

Mathew … I got your book … I start reading this weekend.

Post Reply

Mathew Padilla says:

November 7, 2008 at 5:31 pm

lee,

Hope you enjoy the book. I mostly did the subprime O.C. stuff but contributed to other chapters.

ozajh says:

November 7, 2008 at 10:55 pm

What is the reason for the 14% cut, and how often is the limit readjusted?

If it’s related to the median price, then there is the potential for a nasty little feedback loop here.

Suzi says:

November 8, 2008 at 2:18 am

Don’t fall for this trick by our fed. Wait another 3 or so years before buying a property. This price decline is not ending soon. I suggest everyone visit the following site to track home prices in their neighborhood. Home prices are not rising anytime soon!

http://www.homepricetrend.com

CARSON CITY says:

November 8, 2008 at 6:23 am

I thought it was 115% of the median SFR; is this true? This would make the conforming Jumbo $546K in OC.

November 8, 2008 at 6:28 am

Current loan limits for an FHA insured mortgage are 115% of an area’s median home price, not to exceed $625,500. When the new Housing Bill takes effect, this loan limit will become permanent.

Fannie Mae and Freddie Mac loan limits will remain at $417,000 for this year. In 2009, the loan limits will reflect those of FHA with an increase in higher-cost areas to 115% of the area’s median home price.

Alex says:

November 9, 2008 at 10:33 am

What’s that “whooshing” sound? It’s the homebuyers going back to the sidelines until Jan 2009. Sorry Greedy Home Sellers, but your $$$$ is going down the drain.

Snacker says:

November 9, 2008 at 11:11 pm

Ozajh,

The reason for the decrease is that the increase to $729,000 was only temporary for 1 year as part of the original housing stimulus package. This was to expire on Jan 2009. The new loan limit is $625,500 which was determined by the latest housing stimulus bill. The original limit was $417,000.

This has nothing to do with housing median and more about trying to prop up the housing market. Real estate associations want to keep the limit even higher. It really is pretty ridiculous for any area except perhaps the really bubble prone areas, particularly california. No where else do houses come close to these prices.

Orange County Register