Group Wants $1 Million Conforming Loan Limit

June 4, 2009 No Comments »

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It seems these days people want the government to do everything, at least when it comes to mortgages.

The latest evidence of this comes from a letter sent to the FHFA from the Consumer Mortgage Coalition, urging the regulator to throw out the current conforming loan limits.

The group’s letter, cited by National Mortgage News, calls for a temporary national conforming loan limit for single-family homes set at $1,000,000 to boost market liquidity.

“We recommend that the conforming loan limit be suspended for loans below $1 million while the FHFA serves as the GSE conservator so that the government-sponsored enterprises can add liquidity throughout the mortgage market and across the country,” the letter read.

The current high-cost conforming loan limits range from above $417,000 to $729,750, which the group said were “causing market disruptions.”

The temporary nature of the higher loan limits put off investors and limited how many high-balance loans could be bundled with other traditional conforming loans, thereby reducing effectiveness.

But these loan limits are an improvement from the $417,000 loan limit seen previously, which put most of the high-cost regions of California in the more expensive jumbo loan realm.

The Mortgage Bankers Association is also lobbying for a permanent nationwide loan limit of $625,500 for loans backed by Fannie Mae, Freddie Mac, and the FHA, along with a high-cost loan limit of up to $729,750.

(photo: cherryfluff)

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