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Conforming Loan Limits

Fannie, Freddie and FHFA issue updates

October 17, 2008

By MortgageDaily.com staff

Fannie Mae, Freddie Mac and their regulator have issued updates on loan limits and fees.

Conforming loan limit calculations vary depending on which recently passed law they are based on.

Under H.R. 5140, the Economic Stimulus Act of 2008, jumbo-conforming loan limits are set at 125 percent of the local median home price, according to a bulletin today from the Federal Housing Finance Agency -- Fannie's and Freddie's regulator. The maximum jumbo-conforming limit is 175 percent of the $417,000 national conforming limit -- or $729,750 in the continental U.S.

But the higher limits as outlined in H.R. 5140 apply only to jumbo conforming loans originated this year and ends on Dec. 31.

However, under H.R. 3221, the Housing and the Economic Recovery Act of 2008, high-cost loam limits are set at 115 percent of the local median price up to a maximum of 150 percent of the national limit. FHFA said that if the conforming limit remains at $417,000 for 2009, then the maximum limit in high-cost areas would be $625,500.

Limits under H.R. 3221 are set each year and based on high-cost areas as designated by the Federal Housing Administration. Median prices will be calculated by FHA during the coming weeks so that 2009 high-cost limits can be determined. However, the new law specifies that the general loan limits may not decrease even if national housing prices decrease.

Fannie issued a bulletin yesterday that indicated the 2008 general loan limits are likely to be the same in 2009. Based on this assumption, the high-cost limit on two-unit properties for loans in the contiguous states, Washington, D.C., and Puerto Rico, will be $800,775. Three-unit financing will be limited to $967,950 and four-unit loans will be capped at $1,202,925. Loan limits in Alaska, Guam, Hawaii and the U.S. Virgin Islands will be approximately 50 percent higher.

Fannie will begin purchasing loans with note dates on or after Oct. 1, 2008, under the limits spelled out in H.R. 3221 as of Jan. 1, 2009. Mortgage-backed securities with loans under these limits will be effective for issuances with delivery dates of Jan. 1, 2009.

Only first liens secured by one- to four-unit properties are acceptable for high-cost limits, Fannie said. The maximum loan-to-value is 90 percent on purchases and limited cashout refinance transactions for single-family properties. Owner-occupied two-unit properties are limited to 75 percent LTV.

For cashout refinances on high-cost limit loans, the LTV is limited to 75 percent on both one- and two-unit properties. Purchase transactions on investment one- and two-unit properties are also limited to 75 percent LTV.

High-cost MyCommunityMortgage loans can be secured by one- to four-unit properties and can go to 90 percent LTV.

Fannie noted investor cashouts, balloon loans, streamlined refinances and adjustable-rate mortgages with representative credit scores below 680 are ineligible for high-cost limits. Loan-level price adjustments are 0.75 percent if the LTV doesn't exceed 75 percent, 1.50 percent if the LTV is more than 75 percent and 1.00 percent for cashouts.

Freddie said in its own bulletin today that it has designated loans with high-cost limits under H.R. 3221 as "super conforming mortgages." It will purchase these loans on or after Jan. 2, 2009.

Freddie also said it was eliminating its increase to the Market Condition delivery fee rate -- leaving it at 0.25 percent. Fannie announced earlier this month that it reversed its decision to double its adverse market delivery charges -- leaving the fee at 0.25 percent.

But Freddie increased the delivery fees on two- to four-unit properties by 0.50 percent.

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