The U.S. Department of Housing and Urban Development last week published new FHA and conforming loan limits, based on median home prices as mandated by the Economic Stimulus Act signed by President Bush in February. New loan limits for FHA and Fannie Mae and Freddie Mac are now calculated at 125 percent of the HUD published median prices, with a floor of $271,050 and $417,000, respectively, not to exceed $729,750. The National Association of REALTORS® expects the impact on the housing market to be significant because of the infusion of capital into the mortgage market, which should result in lower interest rates across the board. In addition, there will be a direct impact on high-cost areas, such as San Francisco, that previously required borrowers to take out costlier jumbo mortgages. The new FHA loan limits can be accessed online. To find the Fannie Mae and Freddie Mac conforming loan limits on the HUD site, choose "Fannie/Freddie" in the drop-down menu called "Limit Type."
What This Means for Housing, REALTORS®, and the Economy
NAR research points out that increasing FHA loan limits will help an additional 138,000 Americans achieve the dream of home ownership and will allow nearly 200,000 homeowners to refinance and potentially keep their home. In addition, NAR believes that increasing the loan limits for Fannie Mae and Freddie Mac will bolster the housing finance market, which continues to be severely stressed, by providing an immediate infusion of much needed liquidity to the nation’s mortgage market.
An economic impact study conducted by NAR in January 2008 estimated that increasing the GSEs’ conforming loan limits would result in as many as 500,000 refinanced loans and could help reduce foreclosures by as much as 210,000. In addition, over 300,000 additional home sales could be generated, housing inventory would be reduced and home prices would be strengthened by two to three percentage points.
Why HUD Took This Action
HUD was mandated in the Economic Stimulus Act to publish new loan limits within 30 days of the bill's signing by President Bush on February 13.
How HUD Calculates Its Median Home Prices
HUD median home prices differ from those published by NAR. That is because HUD uses a variety of sources and different areas to calculate the median home price.
Who Will be Affected
Increased loan limits will have a wide impact. The added liquidity in the mortgage market will help to make mortgages more easily available. Receiving direct help will be borrowers in high-cost areas who previously had no recourse except high-cost jumbo loans, and those with high-cost loans who can refinance into lower interest rate loans.