PROPERTY LINES
Conforming loan limits set to expire on Sept. 30
What does this mean?
Contrary to what you may have heard, fewer residential borrowers than you might expect will be adversely affected by reduction of the high balance conforming loan limit. In San Francisco, the current limit of $729,750 will be reduced to $625,500 on Oct. 1, 2011.
Why will fewer borrowers be adversely affected?
Freddie Mac, Fannie Mae and FHA account for approximately 50 percent of all residential loans in the United States. The other 50 percent are funded by a wide variety of lenders, offering traditional loan products and many niche products for specialty needs. These lenders and products are not affected by the expiration of the conforming loan limits.
Traditionally, Freddie Mac-, Fannie Mae- and FHA-backed loans were offered at lower rates than the others. That is no longer the case. For example, many of the adjustable rate mortgage (ARM) products offered by portfolio lenders have rates that are actually lower than those available through Freddie Mac, Fannie Mae and FHA.
Who loses with the maximum conforming loan reduction?
Until recently, it was difficult to find loan programs for borrowers with less than a 20 percent down payment other than those offered through Freddie Mac, Fannie Mae and FHA. Fortunately, many portfolio lenders are offering new and expanded loan products. Here is an example: There is a new 30-year fixed loan of up to $779,750 available for condominium and single-family home purchases, requiring only 10 percent down for qualified buyers.
The squeeze comes down on those buyers with less than 10 percent down who had hoped to borrow between $625,500 and $729,750. These borrowers will need to close their new loans by Sept. 30, 2011 before the super conforming limits expire.
Tim Wood is vice president and mortgage advisor at Terra Mortgage Banking. Contact him at 415-464-1374 or [email protected].
