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FHA, Conforming Limits Boosted

$729,750 limit effective July 1 to Dec. 31

February 13, 2008

By SAM GARCIA


President Bush has signed into law emergency legislation that will temporarily increase the conforming limit by 75 percent. In addition, the limit for loans insured by the Federal Housing Administration will also see a temporary boost.

H.R. 5140, the Economic Stimulus Act of 2008, was signed by Bush this afternoon.

The bill is intended to jumpstart the ailing U.S. economy and help the country avert a recession -- though some suggest a recession is already in place.

Among the pieces of the new law is a temporary increase in the conforming loan limit and the FHA limit.

The conforming limit, which is the maximum amount of a residential mortgage that can be purchased by government sponsored housing enterprises Fannie Mae or Freddie Mac, is currently $417,000. However, under H.R. 5140, the conforming limit will be increased by 75 percent to $729,750 from July 1, 2008, until Dec. 31, 2008.

photo of Bush at H.R.  5140 sigining
President Bush

The temporary increase to the conforming loan amount is limited, however, to 125 percent of an area's median home price as determined by the U.S. Department of Housing and Urban Development. HUD is required to post area median prices and loan limits within 30 days.

"It is the sense of the Congress that the securitization of mortgages by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation plays an important role in providing liquidity to the United States housing markets," the legislation said. "Therefore, the Congress encourages the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation to securitize mortgages acquired under the increased conforming loan limits established in this section, to the extent that such securitizations can be effected in a timely and efficient manner that does not impose additional costs for mortgages originated, purchased, or securitized under the existing limits or interfere with the goal of adding liquidity to the market."

In addition, the cap for FHA-insured loans, currently at $362,790, will also be increased to $729,750 from July 1 until the end of the year. The same limitation of 125 percent of the median home price for the area applies to FHA loans.

The higher limits will help an estimated 138,000 FHA borrowers qualify for home financing that previously could not, according to the National Association of Realtors. Conventional conforming borrowers would increase by around 300,000.

In addition, the group projects around 410,000 foreclosures will be averted as a result of the new law.

photo of Bush signing H.R. 5140
signing of bill

The bill was originally announced by Bush on Jan. 24 and moved through both houses of Congress at lightning speed.

"Congress can also help by passing legislation to reform the regulation of Fannie Mae and Freddie Mac, to modernize the Federal Housing Administration, and to allow state housing agencies to issue tax-free bonds to help homeowners refinance their mortgages," the president said at today's signing ceremony, according to a White House transcript of his prepared remarks. "I hope that Congress can act on these matters quickly."

Related:

Emergency Action May Boost Loan Limits
House and Senate Democrats have worked out an economic stimulus package with the president that includes an increase to conforming and government loan limits.


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]


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