The Loan Limits They Are A’Changin’

Early in 2013, then director of the FHFA, Edward DeMarco, signaled that conforming loan limits might be reduced in 2014. Here in the Bay Area of California, this would have likely entailed a reduction from $417,000 to $400,000 on the conforming side, and a decrease from $625,500 to $600,000 on conforming jumbo programs. While the change appears small, there is no doubt that over the years many borrowers have financed right up to these limits and there was no question among loan professionals that some of our clients would need to take action should the limits be scaled back. However, at present, thankfully this change does not appear imminent and we can expect that loan limits will remain at current levels through 2014.

FHA loan limits, on the other hand, have recently seen a reduction of their own, and on average this equates to approximately $70,000 per metropolitan statistical area (MSA). San Francisco, for example, will see its high-balance FHA loan size drop from $729,750 to $625,500. If you’re in a high-balance FHA loan and would like to explore the options available for eliminating mortgage insurance, this might be a good time to do so, as a streamline FHA refinance would no longer be an alternative since your loan balance would exceed the new limit. VA loans will also see some changes, and if you have questions about these, certainly get in touch.

Our government agencies, Fannie Mae, Freddie Mac and the FHA, have expressed a desire to exit the higher-balance mortgage market in the hopes that private capital will come in to fill any void. We have already seen this happening in the traditional jumbo loan market, and RPM Mortgage continues to expand its loan product options at the higher end of the spectrum in response. With each new investor, we’ve gained added flexibility to lend as well as more pricing power, and both of these greatly benefit the RPM client. It is also true that some of RPM’s jumbo programs will take over at loan amounts of just $417,001.

Courtesy of Barry O’leary, RPM Mortgage, who can be reached at boleary@rpm-mtg.com