A Raise in the Conforming Loan Limits… Kinda

Earlier this month, Congress passed and the President signed legislation authorizing a TEMPORARY increase in the conforming loan limit for high-cost areas. Yes, our area does qualify if anyone had any doubts. There is a formula that determines what the conforming limit will be for each area, and I expect the limit for our area to be $729,750. The temporary increase is set to expire in January of 2009.

HOWEVER, it appears that the actual implementation of this new limit is yet a ways away. The logistics of this implementation require Freddie Mac and Fannie Mae, the two quasi-government corporations that regulate the market in conforming loans, to calculate the various ceilings and actually decide to buy the higher loan amounts. This may seem an easy enough process, but since it has been several weeks since the legislation was passed and there has been no announcement from either market maker, it may be the spring before it happens. In the mean time, Jumbo interest rates continue to be over a full percentage point higher than conforming rates. Add this higher rate to the tighter guidelines that most lenders have established since last year and you can understand why sales for Santa Cruz County have been averaging under 100 closings per month recently.

Now, when this entire process finally works its way through the system, expect long delays in the processing of all loans as homeowners who have jumbo interest rates and adjustable rates swarm to take advantage of the lower rates. This deluge of new loans is going to overwhelm the current infrastructure of the lenders who have downsized their staffs because of the sharp drop in business in the last year.

My recommendation is that if the new limits will benefit you, than get your paperwork together now and be ready to jump when they finally decide to put everything in place. You can download a complete loan application as well as all other forms and required documentation from our web site: www.mountaincoast.com. Or give us a call and we will be happy to drop a loan package in the mail to you.

CURRENT conforming loan rates (loans $417,000 and under) as of 2/22/08 (a.m.) are:
(Rates quoted are for 0 point loans)
30 year fixed: 6.25% (APR 6.32%) payments are $2,567.54/mo
15 year fixed: 5.875% (APR 5.99%) payments are $3,490.78/mo.