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Wednesday, March 26, 2008

OFHEO Releases Final Guidance on Conforming Loan Limits

by Calculated Risk on 3/26/2008 12:45:00 PM

How many people think the new "temporary jumbo conforming loan limits" are really temporary?

Apparently the Office of Federal Housing Enterprise Oversight (OFHEO) does.

From OFHEO: OFHEO Issues Final Guidance on Conforming Loan Limit Calculations

The final Guidance addresses the handling of decreases in the house price data used to set the conforming loan limit as well as procedural matters relating to calculation of the limit that determines the size of mortgages eligible for purchase by Fannie Mae and Freddie Mac.

Based on comments received in two public comment periods, OFHEO is issuing a final Guidance that provides that the conforming loan limit would not decrease from its current level of $417,000 in 2009 and subsequent years. However, the conforming loan limit will not increase until cumulative increases in house prices exceed cumulative decreases since the $417,000 limit was first reached.
This means the conforming loan limit can never decrease, but it will not increase until prices have returned to earlier levels. Under the old guidance, the conforming loan limit was supposed to move with house prices, both up and down.

Of course, "temporary" probably means "permanent", and the limit will vary by MSA (Metropolitan Statistical Area).