November 7, 2008
Washington, DC - The Federal Housing Finance Agency (FHFA) today announced the conforming loan limit will lower to $625,500 (from $729,750) for Los Angeles County.
In case you don't know who the heck is FHFA - they are the agency that regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government sponsored enterprises provide more than $6.2 trillion in funding for U.S. mortgage markets and financial institutions.
The conforming loan limit above is the maximum size of loans that Fannie Mae and Freddie Mac can purchase in 2009. They are sometimes referred to as Jumbo mortgage loans.
Following the provisions of the Housing and Economic Recovery Act of 2008 (HERA), FHFA has reset loan limits for "high cost" areas like Los Angeles in 2009. The new limits of $625,500 affect loans purchases by an Enterprise in 2009, unless loans were made permanently eligible for purchase under the Economic Stimulus Act enacted earlier in 2008 with the higher limits of $729,750.
FHFA kept national conforming loan limit to remain at $417,000 in 2009 for most areas in the U.S. This was based on declines in FHFA's monthly and quarterly house price indexes over the past year. Monthly purchase-only index declined 5.9 percent over the 12 months ending August 2008, and quarterly all-transactions index dropped 1.7 percent from 2007 Q2 to 2008 Q2.
FHFA calculated loan limits using median house price estimates calculated by the Federal Housing Administration (FHA) for the purpose of setting its own loan limits and has used data from varied sources, including aggregated county recorder data (supplied by Radar Logic), the American Community Survey, and the National Association of Realtors (NAR).
The Department of Housing and Urban Development (HUD) will allow a 30-day appeals period for those waiting to contest its median price estimates. Appeals are to based upon data suggesting a potentially higher median price for a given area. Details relating to the appeals process will be released later today.
The FHFA has used median house prices estimated by FHA for 2009 loan limits. However it may choose alternative methods in future years. FHFA will seek public comment on a forthcoming propposal concerning the best approach to measuring price medians for this application.