Wednesday, Feb. 18
Posted 11 a.m. EST
CONFORMING LIMITS: People living in places such as San Francisco, where houses are expensive, will be able to get jumbo conforming mortgages of up to $729,750 this year.
The economic stimulus law, enacted yesterday with President Barack Obama's signature, brings the jumbo conforming limits back to where they were for much of 2008. Those limits were reduced on Jan. 1, down to a maximum of $625,500.
Sometimes it seems that you need an accounting degree to keep track of changes in mortgage limits. They have bounced up and down in the last year or so.
Until the spring of 2008, you could divide mortgages into two types: conforming and jumbo. At the beginning of 2008, a conforming mortgage was a loan for $417,000 or less. A mortgage for more than that amount was a jumbo loan.
A conforming mortgage is a loan that conforms to guidelines set by Fannie Mae and Freddie Mac. Among those guidelines is the $417,000 maximum loan amount. Conforming mortgages are eligible to be guaranteed by Fannie and Freddie -- a guarantee that helps to keep interest rates down. Rates for conforming mortgages are lower than rates for jumbo loans.
Last spring, Congress carved out a new type of loan: the jumbo conforming. In the most expensive areas -- think New York City, Los Angeles, San Francisco and other very pricey cities -- loans of up to $729,750 would be eligible to be guaranteed by Fannie and Freddie. In some places, where house prices were high but not incredibly so, the jumbo conforming limit was less than $729,750 but more than $417,000. In most of the country, where house prices are low or moderate, the limit remained $417,000.
As I mentioned, the beginning of 2009 brought new, lower jumbo conforming limits. The economic stimulus law restores those jumbo conforming limits to where they were at the end of 2008.