Conforming Loan Limit May DECREASE in 2007 : Alliance Academy

Wednesday, November 8, 2006 - Conforming Loan Limit May DECREASE in 2007

From Reuters: Limit on GSE-eligible mortgages may decline for '07
By Al Yoon

NEW YORK, Nov 1 (Reuters) - Declining home values in 2006 may reduce the size of loans eligible for purchase by Fannie Mae and Freddie Mac, raising consumer borrowing costs in some high-priced regions, analysts said.

The so-called "conforming" loan limit is based on home prices in the Federal Housing Finance Board's Monthly Interest Rate Survey, which have declined 3.1 percent in the 12 months through September. The limit for 2007 will be calculated upon release of October data on Nov. 28.

Fannie Mae and Freddie Mac , government-sponsored enterprises, or GSEs, that raise money for low- to moderate-income housing from investors, have depended on higher limits to reach borrowers as home prices rose. A smaller limit may match a broad decline in loan sizes, but disadvantage the companies in areas where prices remain above the 2006 limit of $417,000.

Loans within the conforming limit cost borrowers up to 0.5 percentage point less than a "jumbo" loan. A new $417,000 loan would therefore cost a homeowner more than $100 in additional payments each month if the limit is cut.

The loan limit has not declined since falling by $150 in 1990 to $187,450. Its 15.9 percent jump for 2006 more than doubled the average rise during the decade-long housing boom.

(end article exerpt)

The new loan limits will be announced in the upcoming weeks for implementation January 1, 2007.

Here is the historical data of the changes in conforming loan limits for the past decade in case you're curious!

2006   $417,000
2005   $359,650
2004   $333,700
2003   $322,700
2002   $300,700
2001   $275,000
2000   $252,700
1999   $240,000
1998   $227,150
1997   $214,600
1996   $207,000

TAMU's economists say that the medain home price in Texas was $174,100 in 2005

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Wednesday, November 8, 2006 - Conforming Loan Limit May DECREASE in 2007

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