UPDATE to conforming loan limit changes are reviewed on 3/29/09 here: http://loansbyireneblog.com/2009/03/28/explaining-the-conforming-loan-limit-changes/
Many of you are already aware of one of the major components of the Economic Stimulus Plan: the temporary increase of the conforming loan limit to a max of $729,750, depending on the county. Much of the Bay Area, Los Angeles and San Diego counties apply for this maximum amount. The purpose of this increase was to decrease interest rates for loan amounts in the $417,000-$729,750 range (because these new loans can now be sold on the secondary market to FannieMae). This certainly did help, since between August 2007 and March 2008 (when the new conforming loan limits went into effect), interest rates at this level were a full percentage point above true conforming loan limits (any loan amount below $417k is “true” conforming).
So what’s going to happen to this “temporary” loan limit of $729,750? Well, it’s still set to expire on 12.31.08, but the hot news topic is that the governmental bill HR 3221 is establishing new “permanent” conforming loan limits. The bad news is that the new conforming loan limit will be readjusted downwards, based on HUD’s current median home prices and with an absolute max of $625,500, but the good news is that the limit will not go back to the original of $417,000. This means that I can only encourage those that need loans in the $625,500 – $729,750 range to buy or refinance and close before the end of the year.
Many California counties qualify for the new proposed conforming limit of $625,500 for 1-unit homes. Included in this max are Alameda, Los Angeles, Marin, Orange, San Diego, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz and Ventura counties.
55% of gross income!!?? are you kidding? is that what it was before?? what idiots. no wonder people are defaulting on their loans! if you make 10k a month and 1/3 of that goes to taxes, you’re left with 6,600 net. how in the world would anybody justify spending 5500 of that to their static debt alone? am i crazy for thinking this? good lord. people need to be protected from themselves. good for them for cutting the ratio back.
Bravo, Too bad RE agents, mortgage brokers and the rest of this utterly clueless industry had not given this a thought. We wouldn’t be in this mess if people made this kind of minimal consideration of risk.
Everyone is to blame, but it wasn’t just the people involved, it was the institutions setting these guidelines and buying loans on the secondary market under these terms. That’s where it all started…