Economic Stimulus Plan ~ Latest Status on Impact to Maximum Loan Limits

For Conventional Conforming Business

Here's what we can tell you thus far for Conventional Conforming loans... again nothing is final until Fannie Mae/Freddie Mac and HUD make their formal announcements.

Fannie Mae and Freddie Mac need to consider many factors as they determine how to implement the new products. Once they have, they will send a formal announcement with the details.  The general target for release by the GSE's is the beginning of April.  Because it is a temporary measure, this will not be as quick and easy as past increases to the maximum loan limits that were tied to home price appreciation.

Below are some high level details that Fannie and/or Freddie have provided to date:

• The new legislation sets maximum loan amounts based on calculations tied to the HUD Median House Price amounts:

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  • The maximum loan limit will be increased to 125% of the HUD Median House Price based on Metropolitan Statistical Area (MSA) up to 175% of the current conforming limit, never to exceed $729,750 for a single-family property
  • The new loan limits will not be uniform across the country
  • HUD is required to publish revised median house prices to implement the legislation within the next 30 days
• Product parameters will be more restrictive than conforming products:
  • Full Documentation and Full Appraisals will be required
  • 660 minimum credit score
  • 90% LTV maximum for primary residence purchases and rate/term refi's (lower LTV limits for investment properties,  second homes, and cashout refi's)
  • 0x30 on all mortgage debt in past 12 months
  • 12 months minimum seasoning for cashout refinances since prior refinance
  • Full project review required on condos
  • The declining markets policy will be in effect (5% reduction of maximum LTV / CLTV for properties located within a declining market)
  • Product types will likely be limited to 5-yr ARMs (P&I and IO), 15- and 30-yr fixed P&I products
  • Full documentation means that variances such as VIP will not be eligible for loans within this product
• There will be special Pricing and Delivery requirements
  • Pricing will not be the same as current conforming product (we expect pricing to be somewhere between current jumbo and conforming pricing)
  • Because of the special requirements, PHH will release new products to identify these separately

Please note: the abovementioned product parameters are based on preliminary guidance only and are subject to change by Fannie Mae and/or Freddie Mac.

For FHA Business

We have not received any information as to whether or not HUD will impose any additional LTV, credit, or documentation requirements beyond standard guidelines for FHA products. As we become aware of these details, we will let you know.

Regarding HUD Sales Price Limits, the following describes how HUD derives their limits and how this new Law impacts these calculations.

For most areas, FHA limits are set at 95% of the median home price for the area.  However, there are Floor and Ceiling limits that are applied to low and high cost areas.

• Floor: The 1-unit "Floor" will now be $271,050 (currently $200,160)
  • The "Floor" is derived from calculating 65% of the conforming limit for 1-unit properties (previously calculated using 48%)
  • The "Floor" is used for areas in which 95% of the median home price is less than $271,050
• Ceiling: The 1-unit "Ceiling" will now be $729,750 (currently $200,160)
  • The "Ceiling" is derived from calculating 175% of the conforming limit for 1-unit properties (previously calculated using 87%)
  • The "Ceiling" is used for areas in which 95% of the median home price exceeds $729,750

As is the case for GSE eligible loans, exact limits per MSA cannot be determined until HUD releases the latest Median Sales Prices per MSA and confirms each MSA's maximum loan limit.