Industry NewsMortgage

Raising conforming loan limit not a simple task

Fannie, Freddie may have to tiptoe into 'jumbo light' market

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While Fannie Mae, Freddie Mac and the Federal Housing Administration will soon be allowed to dive into what until now has been the jumbo loan market, it remains to be seen how many borrowers will benefit. Congress and the Bush administration have agreed to raise the $417,000 conforming loan limit until the end of the year, under a provision of the $150 billion economic stimulus package approved by Congress last week (see Inman News story). But the devil, as they say, will be in the details. The new formula for determining the conforming loan limit will allow Fannie, Freddie and FHA to guarantee loans of up to 125 percent of the median home price of an area. While housing markets where the median home price exceeds $216,840 will benefit from higher limits for FHA loan guarantee programs, one analysis suggests Fannie and Freddie will be able to tiptoe into the jumbo loan business in only 19 metropolitan statistical areas (MSAs). The first step to be taken to implement the chan...