California Realtors Celebrate Extension of Conforming Loan Limits by Congress

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The U.S. Congress passed this week a continuing resolution that included a provision extending through fiscal year 2011 the current conforming loan limit of $729,750 for high-cost areas, including many in California.

The same limits will also be extended to loans insured by the Federal Housing Administration.  President Obama is expected to sign the resolution today, which is a short-term funding bill that will prevent a government shutdown in the absence of a budget.

The California Association of Realtors (C.A.R.) and the National Association of Realtors (NAR) have long advocated making permanent higher conforming loan limits. As a result of C.A.R.'s and NAR's efforts, a provision of the Housing and Economic Recovery Act of 2008 included temporarily raising the conforming loan limits from $417,000 to $729,750 in high-cost areas and extending the limits through 2009. Yesterday's actions effectively extend the higher conforming loan limits for Fannie, Freddie, and FHA loans through Sept. 30, 2011.  They were set to expire at year's end.

"C.A.R. applauds our congressional representatives for their actions to extend the higher loan limits through 2011," said C.A.R. President Steve Goddard.  "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," he said.

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." Non-conforming or "jumbo loans" typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.

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