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Alex Echeandia's Blog

By Alex Echeandia | Mortgage Broker
or Lender in Rockville, MD

Maximum Conforming Loan Limits to Remain Unchanged in the First Nine Months of 2011

The Federal Housing Finance Agency (FHFA) has announced that, under terms set forth in a recently-enacted Congressional continuing resolution (Public Law Number 111-242), the maximum conforming loan limits for mortgages originated in the first nine months of 2011 will remain unchanged from existing loan limits for 2010 originations.  Those limits are generally $417,000 but can be as much as $729,750 in certain high cost areas in the contiguous United States. 

Under the continuing resolution, the highest loan limits that Fannie Mae and Freddie Mac may set for mortgages originated during the federal government’s Fiscal Year 2011, which extends through September 2011, are to be equal to the higher of the maximums determined under the Economic Stimulus Act of 2008 (ESA) and the Housing and Economic Recovery Act of 2008 (HERA).  While the former limits are fixed dollar amounts, the HERA limits are updated each year.  In setting loan limits for FY2011-originated mortgages, FHFA thus calculated 2011 HERA loan limits and compared the resulting values to limits established under ESA, which tend to be much higher.  FHFA has found that the resulting maximum limits are the same as existing loan limits in every area of the country. 

In addition, Housing and Economic Recovery Act of 2008 (HERA) was created to address the subprime mortgage crisis of 2008. The Housing and Economic Recovery Act (HERA) allowed the Federal Housing Administration (FHA) to guarantee up to $300 billion in new 30-year fixed rate mortgages for subprime borrowers. In order to participate, lenders were required to write down the balances on principal loans up to 90% of their current appraised value.  The FHA-approved lender will determine the size of a loan that a borrower can reasonably repay and that meets the requirements of the program. If the current lender or mortgage holder agrees to write-down the amount of the existing mortgage and make the new loan affordable, the FHA lender will pay off the discounted existing mortgage.

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