Los Angeles Conforming Loan limits dropping

Starting October 1, 2011, the US Government will start to roll back the temporary conforming loan limit increases nationwide. This means more Jumbo loans for borrowers (A Jumbo loan is anything loan larger than Conforming Loan Limit), which have higher interest rates than conforming loans.

The US Gov’s 2008 Economic Stimulus Package increased conforming loan limits from $417,000 to $729,750 in Los Angeles in 2008, improving an ailing housing market. During the “mortgage meltdown” and “credit crunch”, the residential home mortgage sector was in crisis and banks didn’t want to lend money. Underwriting standards were tightened, and it was very difficult for home buyers to get a mortgage.

Under the loan limit drop- San Bernardino will no longer be considered a high cost area for Fannie Mae or Freddie Mac. This will have a huge affect on home buyers in the mid $350,000 to mid $450,00 price range in the Valley.

 

Single Family

County New SFR FHA loan Limit New SFRConforming Limit
Riverside County $355,350 $417,000
San Bernardino County $355,350 $417,000
San Diego County $546,250 $546,250
Orange County $625,500 $625,500
Los Angeles County $625,500 $625,500

 

Income Property

 

Property Type Current Conforming Loan Limit Conforming Loan Limit Oct. 1st, 2011
SFR $729,750 $625,500
2 units $934,200 $800,775
3 units $1,129,250 $967,950
4 units $1,403,400 $1,202,925

 

What does this mean? Higher interest rates for borrows, and lower sales prices for sellers. I think that this reduction in conforming loan limits will hurt sellers the most ironically. I do see a substantial improvement in the housing market in Los Angeles over the last two years, so the roll back does make sense.

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