For those who are unaware, conforming mortgages are loans that fall within the guidelines of Fannie Mae and Freddie Mac, the two largest financiers of home loans in the United States.
The Office of Federal Housing Enterprise Oversight (now the FHFA) sets maximum loan amounts for conforming loans, which are adjusted each year based on October-to-October changes in mean home price.
If the loan amount exceeds the maximum set for conforming loans, it’s considered a jumbo loan, and must be sold to secondary investors other than Fannie and Freddie or kept in portfolio.
The graph below details the change in the conforming loan limits from 1980-2007.
It’s amazing how quickly the conforming loan amount limit has risen in the past thirty years, and especially over the last ten.
Is it due for another increase, or is it set to fall as home prices reach peak values? We’ll find out, but at the moment, it doesn’t look good.