Run that by me again?

I've had quite a few inquiries from people wanting to know what is going to happen with the conforming loan limit and the upper limit for FHA loan guarantee programs in their market under the economic stimulus bill passed by Congress and signed into law today by President Bush (see story).

The language in the stimulus bill IS confusing, and the fact is nobody can tell you exactly what will happen to loan limits in your market until HUD publishes the median home price figures that will be used to determine them. HUD's got 30 days to do that, and then it will take Fannie Mae and Freddie Mac a few weeks (or months) to update their credit guidelines and automated underwriting systems.

But you can get a pretty good idea of what's going to happen to the loan limits in your market. 

Here is what the bill says:

In high cost areas, the conforming loan limit, and the upper limit for FHA loan guarantee programs, will be 125 percent of the median home price for the area, not to exceed $729,750.

In areas that are not high cost markets, the conforming loan limit will remain $417,000. The upper limit for FHA loan guarantee programs in "normal" markets will be raised from $200,160 to $271,050.

So if you are in a high cost area, multiply your median home price by 1.25, and there's your new maximum loan limit for Fannie, Freddie and FHA loan programs (up to $729,750).

What is the median home price for your market? Am I in a high cost area? That's what we need HUD to tell us. They will be providing a median home price for your county or metropolitan statistical area (MSA). If you're in an MSA, it will be the median price for the most expensive county in the MSA.

If you click "continue reading," you will see a chart of an analysis done by the Stanford Group Co. that shows how this might play out in 19 markets. The analysis uses numbers from NAR, which is where HUD may get some of its numbers from. If you don't see your MSA on this chart, that doesn't necessarily mean you won't see increased loan limits.

It seems to me a simple rule of thumb would be if the median home price in your county or MSA is less than $333,600, you will not see an increase in the conforming loan limit (because 125 percent of $333,600 is $417,000).

But EVERYONE will see FHA loan limits go up. Instead of $200,160, the upper limit in "normal" markets will be $271,050. Instead of $372,790 in high cost markets, the upper limit for FHA loan programs will be 1.25 times the median home price, up to $729,750.

Don't forget, these new limits will only be good until Dec. 31, unless Congress works out its differences over other legislation that's intended to further expand FHA  loan programs and strengthen oversight of Fannie and Freddie.

This is a very important issue for buyers and sellers alike, so please: everybody who's got any additional insight on how this will work, leave your comments.    

Estimated conforming loan limit increases

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Metropolitan area	Median price Q3 '07	Estimated new limit
Anaheim-Santa Ana, Calif.	$700,700	$729,750
L.A.-Long Beach-Santa Ana, Calif.	$588,400	$729,750
San Diego-Carlsbad-San Marcos, Calif.	$589,300	$729,750
San Francisco-Oakland-Fremont, Calif.	$825,400	$729,750
San Jose-Sunnyvale-Santa Clara, Calif.	$852,500	$729,750
Riverside-San Bernardino-Ontario, Calif.	$377,000	$471,250
Sacramento-Arden-Arcade-Roseville, Calif.	$335,700	$419,625
Barnstable Town, Mass.	$400,600	$500,750
Boston-Cambridge-Quincy, Mass.	$414,700	$518,375
Boulder, Colo.	$367,500	$459,375
Bridgeport-Stamford-Norwalk, Conn.	$491,100	$613,875
Miami-Fort Lauderdale-Miami Beach, Fla.	$346,800	$433,500
New York-Northern N.J.-Long Island, N.Y./N.J.	$476,100	$595,125
New York-Wayne-White Plains, N.Y.	$550,900	$688,625
Edison, N.J.	$391,800	$489,750
Nassau-Suffolk, N.Y.	$470,000	$587,500
Newark-Union, N.J./Penn.	$459,700	$574,625
Seattle-Tacoma-Bellevue, Wash.	$394,700	$493,375
Wash. D.C.-Arlington-Alexandria, Va./Md./W.V.	$438,000	$547,500

Source: National Association of Realtors, Stanford Group

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