A history of conforming mortgage loan limits from 1980 to the present (i.e. the loan amounts above which borrowers would have to go to the private “jumbo” mortgage market and thus not be able to take advantage of government-subsidized “conforming” mortgage rates).

Notes:

• Conforming limits for Alaska, Hawai’i, Guam, and the U.S. Virgin Islands are 50% higher than the limits given above.
• Prior to 1981, there were no conforming second mortgages. From 1981-1983, conforming second mortgages had the same limits as conforming first mortgages. From 1984 to the present, conforming second mortgages were allowed with a limit equal to 50% of the conforming first mortgage limit for the same year.
• “High-balance” loans are loans for amounts larger than the normal conforming limit for the year in question, but no greater than the high-balance limit for that year and for that area, as described below; the amount given for the High Balance Loan Limit Cap in the table is the highest that those per-area high-balance limits can be, but individual areas may have lower high-balance limits (or possibly no high-balance loans at all) as described below. Also note that high-balance conforming loans usually have higher costs/rates than normal conforming loans; however, those rates and costs are still usually significantly lower than the “jumbo” rates available for loans over the conforming limit.
• Limits prior to 2008 were determined on an annual basis by Fannie Mae and Freddie Mac. Section 1124 of the Housing and Economic Recovery Act of 2008 (HERA) created a statutory formula by which limits would be determined moving forward, and also created a class of “high-cost” areas with higher limits also determined by statutory formula.
  • Specifically, the “basic” conforming limit would be equal to $417k in 2008, and then in each subsequent year it would be increased proportional to the increase in median home prices for the country for the preceding year (as defined by FHFA each year in October, based on sales in the previous 12 months); for example, if home prices go up 5% in a given year, then the conforming limit would be increased by 5% for the following year. If prices go down in a given year, then the conforming limit does not go down; instead, that decrease is “rolled over” to future years, and the limit is only adjusted in years when the net change since the last adjustment is positive. For example, if home prices go down in Year X by 5%, and then go up by 7% in Year X+1, then the limit for Year X+1 wouldn’t be changed (since prices dropped in Year X), and the limit for Year X+2 would be 2% (the net change since the last time limits were adjusted (before Year X)).
  • HERA also established a formula for “high-balance” limits in high-cost areas; specifically, in areas (defined by Census Bureau Metropolitan Statistical Areas or “MSAs”) whose median home sales price (again as defined by FHFA each year in October for the following year, based on sales in the previous 12 months) are higher than 87% of the conforming limit as determined above, the “high-balance” limit will be the lesser of 115% of the median price for that area, or $625,500. For example, if the conforming limit for a given year is $500k, and the median sales price for an MSA is $400k, then that MSA is not a high-cost area, since $400k is less than 87% of $500k. If in that same year another MSA has a median sales price of $480k, then the high-balance limit for that MSA will be $552k. If in that same year a third MSA has a median sales price of $600k, however, then the high-balance limit for that MSA will be $625,500, since 115% of $600k ($690k) is more than $625,500.
• Prior to the enactment of HERA in 2008, which set up the long-term formula for conforming loan limits moving forward, Congress passed the Economic Stimulus Bill of 2008 (ESB 2008), which set the high-balance limit for high-cost areas at $729,750. Thus, the $625,500 high-balance limit set forth in HERA was never in effect in 2008; HERA’s high-balance limits only became practically in effect when ESB 2008 expired on 1/1/2009.
• The American Recovery and Reinvestment Act of 2009 (ARRA) included a provision to increase the conforming high-balance limits for 2009 back to the $729,750 limit that had been in effect for most of 2008 under ESB 2008. ARRA 2009 was passed in February of 2009, but lenders were slow to implement the changes, so the limit for 2009 was practically still $625,500 until April 2009. ARRA 2009′s mortgage limit provisions expire on 12/1/09, at which point the high-balance limit is expected to revert to HERA 2008′s $625,500 limit for the last month of 2009 (unless further legislation is enacted prior to 12/1/09).

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Tags: conforming, mortgage