Real Estate Articles

Conforming Loan Limits Extended Through 2011

On Oct. 1, U.S. Congress approved and President Obama subsequently signed a resolution that included a provision for extending through fiscal year 2011 the current conforming loan limits of $417,000 for most areas in the U.S., and $729,750 for high-cost areas, including Santa Clara and San Mateo counties and most of the Bay Area.

The conforming loan limit determines the maximum size of a mortgage that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.” Each year, the government sets the maximum allowable loan size for a conforming mortgage, based on “typical” housing costs nationwide. Loans in excess of this amount are typically called non-conforming or “jumbo loans.” These non-conforming or “jumbo loans” typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in high-cost areasto purchase homes by making them less affordable.

Realtors have long advocated making the higher conforming loan limits permanent. A provision of the Housing and Economic Recovery Act of 2008 included a temporary increase in the conforming loan limits from $625,500 in high-cost areas to $729,750 and extending the limits through 2009. Congress and the President extended the higher limits for 2010, and the highest limit was set to go down to $625,000. They were set to expire at the end of this year. The recent action by Congress and the President extends the higher conforming loan limits for Fannie Mae, Freddie Mac and Federal Home Administration (FHA) loans through September 30, 2011. 
 
“We’re extremely pleased that Congress and the Obama administration recognize such an action is needed so that the housing market can fully recover,” said Jeff Bell, president of the Silicon Valley Association of REALTORS®. “In the current economy, the market for private, non-GSE mortgage-backed securities has all but disappeared because investors are not willing to accept the risks without the GSE guarantee.”

Bell explained with private funding virtually non-existent, home sales in higher cost areas like Silicon Valley would be badly hurt and the housing recovery slowed if enterprise-sponsored mortgages or FHA guarantees were not available as a substitute for jumbo mortgages.

“Extending the existing limits will help borrowers continue to have access to affordable long-term, fixed-rate mortgage credit,” Bell said.

The Silicon Valley Association of REALTORS®, along with its state and national counterparts – the California Association of REALTORS® and the National Association of REALTORS®, applauded the latest action by Congress and the Obama administration. “C.A.R. applauds our congressional representatives for their actions to extend the higher loan limits through 2011,” said Steve Goddard, C.A.R. president. “Without the extension of the higher loan limits, many California borrowers would have a harder time refinancing homes and obtaining financing for new home purchases.”  

The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, e-mail , or phone (408) 200-0109.

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