Conforming Loan Limit Will Not Fall in 2009

March 26, 2008 No Comments »

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The Office of Federal Housing Enterprise Oversight (OFHEO) announced today that despite a decrease in home prices, the conforming loan limit will not slip below its current level of $417,000 in 2009 and subsequent years.

The final guidance was based on comments received during two public comment periods in which the NAHB, the NAR, and the MBA noted that the OFHEO doesn’t have statutory power to reduce the conforming loan limit.

OFHEO Director James B. Lockhart said in a statement on its website that the move came in response to those comments received and the fact that it will minimize operational issues involved with such implementation.

At the same time, the OFHEO noted that the conforming loan limit will not move any higher until cumulative increases in house prices exceed cumulative losses since the current limit of $417,000 was initially reached.

Additionally, going forward the conforming loan limit will also be rounded down to the nearest $100, instead of the present $50 for simplification purposes.

The conforming loan limit, or the maximum loan size Fannie Mae and Freddie Mac can purchase, is adjusted each year using year-over-year October home price changes based on data from the Federal Housing Finance Board’s (FHFB) Monthly Interest Rate Survey (MIRS).

Interestingly, this is not the first time the OFHEO has kept the conforming limit unchanged despite a decline in home prices.

In November 1993 and November 1994, the conforming loan limit remained constant at $203,150, despite declines in house prices of 2.96 percent in 1993 and 1.46 percent in 1994.

Anything over the conforming loan limit is considered a jumbo mortgage, though you can technically keep a first mortgage under the limit while taking out a concurrent second mortgage.  This is known as piggybacking, or a combo loan.

(photo: mukluk)

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