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Announcing Increased Maximum Loan Limits and Previewing Changes to Super Conforming Mortgage Requirements April 10, 2009 Single Family Advisory

Today we are announcing an increase to our maximum loan limits for super conforming mortgages in certain high-cost areas as permitted under the American Recovery and Reinvestment Act of 2009 (ARRA). This increase is intended to provide lenders with much-needed liquidity in the highest cost areas of the country, while also lowering mortgage financing costs for borrowers located in these areas.

In addition to announcing the increase in our loan limits where applicable, we are also previewing updates to our credit requirements for super conforming mortgages, including changes to our LTV/TLTV/HTLTV ratio requirements for certain super conforming mortgages with higher risk characteristics such as cash-out refinance mortgages and mortgages secured by second homes and investment properties.

Increase to Maximum Loan Limits for Super Conforming Mortgages

The increase to our maximum loan limits will enable Freddie Mac to temporarily purchase super conforming mortgages with original loan amounts up to $729,750 for 1-unit properties located in certain high-cost areas. 

Under ARRA, the loan limits in designated high-cost areas are the higher of the temporary limits established by the Economic Stimulus Act of 2008 (ESA)(maximum of $729,750 for 1-unit single-family properties) and the permanent limits established by the Housing and Economic Recovery Act of 2008 (HERA) (maximum of $625,500 for 1-unit single-family properties). The maximum loan limits for 2- to 4-unit properties and properties located in Alaska, Hawaii, Guam and the U.S. Virgin Islands, where applicable, are higher.

Approximately 250 counties or county equivalents have higher temporary loan limits as a result of the ARRA legislation. Please note that the actual loan limit for a specific high-cost area may be lower than the maximum loan limits noted above. The Federal Housing Finance Agency (FHFA) determines the maximum loan limits for all counties and makes this information available on its Web site.

The higher ARRA loan limits only apply to super conforming mortgages with note dates on or after October 1, 2008, and on or before December 31, 2009. These mortgages must have delivery dates on or after May 4, 2009.

Loan Prospector® will be updated to reflect the higher ARRA loan limits on April 16, 2009.

Preview of Changes to Super Conforming Mortgage Requirements

Today we are also previewing the following key changes to our credit requirements for super conforming mortgages:

  • Changing our existing LTV/TLTV/HTLTV ratio requirements for certain higher risk super conforming mortgages and providing requirements for super conforming mortgages under the ARRA loan limits for the following mortgage and property types:
    • Purchase transaction, no cash-out and cash-out refinance mortgages.
    • Mortgages secured by 1- to 4-unit primary residences, second homes and 1- to 4-unit investment properties.

    Review these changes to our LTV/TLTV/HTLTV ratio requirements for super conforming mortgages.

  • Removing our restrictions on cash proceeds for cash-out refinance super conforming mortgages.

Additionally, we will allow products and offerings included in a Seller’s purchase documents under negotiated contracts to be used with super conforming mortgages with certain restrictions.

Detailed requirements on the changes we are previewing today, as well as additional updates to our super conforming credit requirements will be communicated in an upcoming Guide Bulletin. At that time, we will provide additional information on when Loan Prospector will be updated to reflect the credit changes previewed today.

Effective Dates for Changes Announced Today

All super conforming mortgages with application dates after May 15, 2009, must be originated in accordance with our updated credit requirements for super conforming mortgages, including the LTV/LTLTV/HTLTV ratio requirements we are previewing today.

To allow for pipeline coverage, super conforming mortgages with original loan amounts at or below the permanent county-level maximum loan limits established by HERA, may be originated in accordance with our existing requirements provided they have application dates on or before May 15, 2009, and Freddie Mac settlement dates on or before July 31, 2009.

Super conforming mortgages with original loan amounts greater than the permanent county-level maximum loan limits established by HERA and up to the temporary county-level maximum loan limits allowed by ARRA, must meet the new requirements for super conforming mortgages, including the LTV/TLTV/HTLTV ratio requirements we are previewing today. These mortgages must have delivery dates on or after May 4, 2009.

All applicable Exhibit 19 delivery fees continue to apply to super conforming mortgages.  These mortgages must also meet our delivery and pooling requirements in Guide Chapter 17.44.

For more information

© 2010 Freddie Mac

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