An update...Conforming Loan Limit Increase
by Gabe Bodner, Mortgage Consultant - Lawson and Associates

We may have a breakthrough...March 6th Fannie Mae made an announcement on the timing of when they will be buying the new "Jumbo-Conforming Loans" as they are now calling loans between $417K and the increased limit of $729,750. It is a still a bit confusing but it sounds like they will not be buying loans until July 1, 2008. However, it sounds like they are authorizing lenders to underwrite loans staring April 1, 2008 (with an application date after March 1, 2008).
According to Fannie Mae's most recent update, they will have different (more stringent) guidelines for "Jumbo-Conforming Loans". This does not come as a huge surprise but from what I can see, the new "Jumbo-Conforming Loans" will be very limited in who will benefit. Here are a few of the high points from what I can tell in their guidelines:
· Only 1 unit properties (no 2-plex, 3-plex, or 4-plex)
· When purchasing a home, minimum down payment is 10% with a 700 FICO score (only on a fixed rate mortgage). The only ARM program available is a 5/1 ARM and a 20% down payment is required with a 660 minimum FICO.
· When refinancing a home, no cash out is allowed.
· On a second home or investment property, a minimum of 40% down payment is required.
· Consolidating a first mortgage and a second mortgage is not allowed.
· Refinancing within 6 months of a purchase is not allowed (you must have owned the property for at least 6 months before you can refinance the mortgage into a "Jumbo-Conforming loan").
Additionally, interest rates on conforming loans (and Jumbo loans) have risen anywhere from 0.5-1.0% in the last week (depending on the loan program). Therefore, conforming interest rates are close to what Jumbo rates were about 2 weeks ago which has negated much of the value in this whole loan limit increase package anyway. Overall, these new guidelines will help some people get into a better mortgage at a lower rate but I would not start jumping for joy and celebrating just yet. Hang in there and let's wait to see what pans out over the next month or so.
Below is a statement by Brian Faith Managing Director for Fannie Mae, Communications on the Conforming Loan Limit IncreaseMarch 6, 2008
With HUD's designation of high-cost areas as directed by the economic stimulus package passed into law earlier this year, Fannie Mae will begin temporarily purchasing loans beyond the company's prevailing conventional loan limit in the designated areas. The company may purchase loans with a maximum original principal obligation of up to 125 percent of the area median home price in high-cost areas, not to exceed $729,750 except in Alaska, Hawaii, Guam and the U.S. Virgin Islands where higher limits may apply.
The company will only purchase jumbo-conforming mortgages that are originated from July 1, 2007 through December 31, 2008, and that are secured by one-unit properties. We will assist our lender customers with implementation by providing reference materials including an online loan limit reference tool and guidance on our loan limits based on a property's geography, both of which are expected to be available on April 1, 2008.
The company is working closely with its regulators, OFHEO and HUD, in implementing procedures to address the temporary increase in the prevailing conventional loan limit. We continue to support the increase as a constructive effort to help address the ongoing credit crunch and believe it is in keeping with our core mission to provide liquidity, stability and affordability to the mortgage markets.
For additional information, please see Announcement 08-05, "Temporary Increase to Our Conventional Loan Limits" at www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0805.pdf

FOR MORE INFORMATION, CONTACT GABE BODNER AT 650.492.4071
OR Gabe@BayAreaHomeFinancing.com