Due to enforcement of upcoming laws, mortgage loan limits will be reduced for Fannie Mae, Freddie Mac and the Federal Housing Administration in October 2011, according to National Association of Home Builders.
These limits are expected to affect 204 counties, resulting in an average decline of 11 percent in the loan limit, and approximately 1.38 million owner-occupied homes which fall in the newly lowered price ranges; this is in addition to the 3.63 million homes that are already below the current loan limit. NAHB estimates that approximately 5 million homes would not be able to receive funding if they were on the market.
In cooperation with the Economic Stimulus Act of 2008, and the Housing and Economic Recovery Act of 2008, the formula to measure limits for high-cost areas will experience a 10 percent decline, although the base limit will still be $417,000.
It is anticipated that there will be a surge of non-conforming loans, but with them will come higher downpayment amounts and strict credit score requirements, ultimately leading to decreased prices on the market.
FHA’s ceiling for a loan is currently $729,750, but in October it will lower to $625,500; it is expected that 620 counties will notice a decrease of approximately 14 percent in their FHA loan limit.