Conforming loans

Asked by Mike, Cupertino, CA Wed Feb 4, 2009

I know the conforming loan limit in 2008 was $729,000. I wanted to refinance my home and realize that now conforming loan limits have dropped to about $650,000 (or so). Before I go through the trouble, do any mortgage brokers out there have any sense about if/when that limit might be raised back to $729,000? I've hear plenty of rumors it will. Also, it is impossible to time these things, but when would you predict mortgage rates will be closer to bottom? I want to refinance for 30 years and I am finding nice low rates at 4.2%, but with huge fees in the 3.5pt range! Yikes!

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, ,
Wed Feb 18, 2009
Actually, it is even a little more confusing than that. True conforming loans have been $417,000 for the past several years. In March/April of 2008, legislation allowed for a temporary increase of the conforming loan limit to $729,750, which was termed "conforming jumbo" (or confumbo - as we called it). That temporary increase was eliminated in December 2008. It was replaced with a "perminent" increase to $625,500, termed "super conforming." This was for loans above $417,000 up to $625,500. Both of these options had and have an upcharge in rate as opposed to traditional conforming (up to 417,000).

Now, with the passage of the American Recovery and Reinvestment Act of 2009, the $729,750 has been restored through December of 2009. This is concrete. However, we do not know exactly when Fannie & Freddie will be rolling out the particulars to the lenders. That being said, if you are in need of a refinance with a loan up to $729,750, I would begin the process now as I would anticipate a rollout in the next few weeks.

As for mortgage rates at 4.2% - I don't think you are going to find a "confumbo" deal anywhere near that price. I would anticipate they will start in the low 5% range. You could obviously pay points to lower the overall rate, but that should be based on what the breakeven is in months to repay the initial investment (total closing costs) based on monthly savings.

Hope that helps.
1 vote
, ,
Wed Feb 18, 2009
Great answers so far. It seems like you will have options outside of jumbo financing shortly. On a side note, I know our jumbo pricing is extremely good right now compared to 2008 when it was around 7% most of the year.

One thing I'd like to add is that no way,no how will you ever know if you're at the bottom. It seems Uncle Sam is trying to do all they can to "force" mortgage rates down, however there is a lot of resistance anytime we get around 5% or so. I think this is because the lending industry has laid off thousands of workers the last year and quite frankly there is not enough manpower to handle all the flood of new mortgage applications right now. Lenders are letting the old law of supply and demand dictate rates to some degree. My advice is that if you can lock in a good rate that will save you money then do it, because you never know where rates will head tomorrow. Like they say, hindsight is 20/20.

Good luck!
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Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Wed Feb 4, 2009
Hi Mike,

The jumbo-conforming (J/C) loan limit in Santa Clara County is now $625,500. The Senate is, as we speak, deliberating on the bill that may reinstate the j/c limit to $729,750. If and when they do, we can assume from our experiences in 2008 that such a change could take several months to filter to the consumer level. In addition to market fluctuation, we don't know how any such changes may be priced by lenders at the time they are available.

My advice on a refinance is always the same: Focus on what you can control and define the things you can't. In your case, I would start with analyzing your current situation and seeing if ANY refinance solution makes sense. If so, what are its parameters? Third, once we've set some boundaries we can assess the risk in waiting or acting.

I am in home finance and I would be happy to address any questions you may have. You don't need to make a loan application and there is no cost or obligation in order to research things further. I am confident you will know more after we speak than before, and armed with that knowledge I am sure you will be able to make a more informed decision.

Let me know how I can be of service: 415-367-5959 or .

Thank you!
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