In less than a month, Fannie Mae and Freddie Mac will scale back the size of loans they buy from lenders, which some industry groups are saying will hurt home sales and could further dampen a housing market recovery. The drop in the conforming loan limit may make it more difficult for some buyers to purchase homes in expensive markets, housing experts say.
The current loan limits are set to expire Oct. 1. If an extension isn’t granted, the maximum mortgage amount in high-cost areas will drop from $729,750 to $625,500 (although that limit will vary throughout the country).
Some banks, such as Bank of America, have already stopped taking new applications for jumbo loans at the current rate so that they can process the ones already in the pipeline in time for the Oct. 1 deadline.
The drop in the conforming loan limit is expected to impact 2 percent of homes nationwide, but will have a much greater effect in some areas. For example, some analysts say 10 percent of the housing market in New York will be affected.
Pamela Liebman, CEO of New York real estate company the Corcoran Group, told USA Today that the new loan requirements will “put a lot of buyers out of the market.”
Meanwhile, lobbying efforts are continuing, as several industry groups, including the National Association of REALTORS®, are urging Congress to act quickly on a two-year extension to maintain the GSE loan limit at $729,750.
Source: “Coming Loan Changes Could Squeeze High-Priced Home Markets,” USA Today (Sept. 6, 2011)