California Loans News

The U.S. Congress passed a congressional resolution last November 1 extending the conforming loan limits through the year 2010. This stated that the current conforming loan limits of $417,000 for most locations in the country and $729,750 for high-cost areas like California would be extended. President Obama was expected to sign the resolution within two days as part of budgetary legislation preventing government shutdown.

The California Association of Realtors (CAR) and the National Association of Realtors (NAR) have been outspoken advocates of making higher conforming loan limits higher. The two groups have also contributed efforts for the provision of the Housing and Economic Recovery Act of 2008. This included the temporary raising of conforming loan limits from $625,500 in high-cost areas to the said amount above. The limits have also been extended until this year. In addition, the recent resolution has paved the way to extending the higher conforming loan limits for Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) loans until the next year.

CAR president James Liptak said, “There is no doubt that higher loan limits and the federal tax credits for first-time homebuyers have helped stabilize California’s housing market over the last year. CAR applauds our congressional representatives for their actions to extend the higher loan limits through 2010. They now should focus on making higher loan limits permanent.”

The conforming loan limit establishes the capacity of Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or guarantee. This also refers to the maximum size of a mortgage the said GSEs would be allowed to purchase. Non-conforming or “jumbo loans” on the other hand are those that usually carry higher mortgage interest rates. These have increasing monthly payments which may hinder families in California to buy residential properties that have been made less affordable through such loans.

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