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August 31, 2011

Loan Limits To Drop Below $417,000 For 2012?

August 31, 2011

Loan Limits To Drop Below $417,000 For 2012?

Congress (80% of which has no background in business or economics according to TheHill.com) is on vacation, putting any talk of extending loan limits on hold, so high-balance conforming loan limits will be cut from $729,750 to $625,500 on October 1. Details here. But there is a rumor about permanent (non-high-balance) loan limits being reduced even below the $417,000 level. Could this permanent loan limit go down?

In the old days, next year’s loan limits would come out around Thanksgiving, and reflect value trends. While there have been median home price declines over the past three years, FHFA followed a policy to ‘not permit declines relative to the prior HERA limits.’ Several months ago, FHFA and Fannie Mae published the permanent loan limits applicable to loans originated on or after October 1, 2011, and which are acquired by Fannie Mae in 2011. Therefore, no changes are expected to those permanent limits between October 1, 2011, and December 31, 2011. FHFA has not indicated whether it will continue its policy of not permitting declines in HERA-based limits beyond 2011.” Details here.