|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.
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.
Emergency Action May Boost Loan Limits
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