The Federal Housing Finance Agency (FHFA) announced revisions to their conforming loan limits for 2009 last Friday.?? The new limit for 2009 will remain at $417,000 in most areas of the US, however loan limits for higher cost areas including California have been lowered to $625,500 from $729,750.?? Many areas in California do not reach this lower cap and are reduced significantly from 2008.
The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
Even thought the lowering of the cap means that the total number of that are eligible for conforming financing will increase, some market experts are disappointed that the $729,750 limit set forth in the Economic Stimulus Act of 2008 was not made permanent.?? Some experts are predicting that the limit cap reduction will negatively impact both the interest rates and the availability of funds for jumbo mortgages.??
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