From Homescape

In yesterday’s blog I wrote about a plan in President Bush’s economic stimulus package that includes a one-year increase in the loan limit to $729,750, from $417,000 for Fannie Mae and Freddie Mac and $372,790 for the Federal Housing Administration (FHA). Congressional leaders hope that the plan will help millions of homeowners refinance to take advantage of the failing interest rates. But according to real estate news service, Inman News, raising conforming loan limits will not be as simple as the plan appears.

“The devil, as they say, will be in the details. The new formula for determining the conforming loan limit will only allow Fannie, Freddie and FHA to guarantee loans of up to 125 percent of the median home price of an area,” Inman News reports. As a result, the $417,000 conforming loan limits will remain in place in markets where the median home price is $333,600 or less, which in affect will have minimal impact on the overall housing market. But proponents of the plan say authorizing Fannie and Freddie to purchase or guarantee increased loan limits in states like California and Washington, D.C., — which have significantly larger housing markets — will benefit greatly.

The Stanford Group Co., which follows the secondary mortgage market, recently released a report using median-home price data from the National Association of Realtors to analyze which housing markets Fannie and Freddie might be able to purchase or guarantee loans above the current $417,000 limit. The Stanford Group identified 19 markets — more than a third of them in California — where the plan will be applicable. About 141 metro areas in the United States with lower median home prices will not see loan limits go up under the plan’s current formula.

Estimated conforming loan limit increases

Metropolitan area	Median price 3rd qtr. 2007	Estimated  new limit
Anaheim-Santa Ana, Calif.	$700,700	$729,750
L.A.-Long Beach-Santa Ana, Calif.	$588,400	$729,750
San Diego-Carlsbad-San Marcos, Calif.	$589,300	$729,750
San Francisco-Oakland-Fremont, Calif.	$825,400	$729,750
San Jose-Sunnyvale-Santa Clara, Calif.	$852,500	$729,750
Riverside-San Bernardino-Ontario, Calif.	$377,000	$471,250
Sacramento-Arden-Arcade-Roseville, Calif.	$335,700	$419,625
Barnstable Town, Mass.	$400,600	$500,750
Boston-Cambridge-Quincy, Mass.	$414,700	$518,375
Boulder, Colo.	$367,500	$459,375
Bridgeport-Stamford-Norwalk, Conn.	$491,100	$613,875
Miami-Fort Lauderdale-Miami Beach, Fla.	$346,800	$433,500
New York-Northern N.J.-Long Island, N.Y./N.J.	$476,100	$595,125
New York-Wayne-White Plains, N.Y.	$550,900	$688,625
Edison, N.J.	$391,800	$489,750
Nassau-Suffolk, N.Y.	$470,000	$587,500
Newark-Union, N.J./Penn.	$459,700	$574,625
Seattle-Tacoma-Bellevue, Wash.	$394,700	$493,375
Wash. D.C.-Arlington-Alexandria, Va./Md./W.V.	$438,000	$547,500

Source: National Association of Realtors, Stanford Group

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