Conforming Loan Limits Rise To Help WA REO Properties?
Conforming Loan Limits Beneficial to WA REO Distressed Properties?
There is a chance that an increase in some conforming loan limits in high-cost real estate markets could provide slightly more opportunities for REO investors purchasing high priced properties. If conforming loan limits are increased, REO investors on the margins of the maximum limit may have an opportunity to access certain loans, giving them more financing options.
Under the Housing and Economic Recovery Act of 2008, the FHFA is charged with adjusting the conforming loan limit annually to 115% of median for a particular area.
But the agency, which oversees the two secondary mortgage market institutions, has made the “policy decision” not to allow the maximum to decline. Also, the law does not allow for any increases in an area’s ceiling until past declines have been made up.
Because conforming loan limits are based on the average price of both new and existing houses sold from one October to the next, it isn’t likely that any increases in the maximum loan limit would be significant even in high-priced areas. For REO properties on the high-end of the price scale, this could mean that some investors looking for financing will need to explore nontraditional loans. The good news is that the Senate has voted to extend the $729,750 maximum on loan limits for FHA, Fannie Mae and Freddie Mac for at least two years.
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