More than 4,100 families in California will be able to benefit from Fannie Mae's and Freddie Mac's announcements yesterday that each will increase its single-family mortgage loan limit from $322,700 to $333,700 in 2004, according to a C.A.R. analysis. "While this is good news for many homebuyers, Fannie Mae's and Freddie Mac's new loan limits do not go far enough to improve homeownership opportunities in California," said C.A.R. President Ann Pettijohn. "Conforming loan limits need to more accurately reflect the cost of housing in California, where the median price of a home is more than double that of the nation."
Based on its 2004 sales projection, C.A.R. expects that 390,800 sales in the state will fall into the price range implied by the higher loan limits, an increase of 11,800 homes over the 2003 loan limits. The $11,000 increase in the single-family mortgage loan limit translates into an additional 4,100 households able to take advantage of savings provided by having a Fannie Mae or Freddie Mac mortgage. Based on a typical 25 basis point spread between conforming and jumbo mortgage loan rates, a typical California homebuyer will save up to $19,900 over the life of a 30-year mortgage. In some areas of the state, the recent spread between conforming and jumbo loans has been as much as 40 basis points. Households in these areas could save up to $32,000 over the life of a 30-year mortgage.
C.A.R. is supporting H.R. 3507, the "Improving Homeownership Opportunities in High Cost States Act of 2003." This legislation will enable homebuyers in California and other states to benefit from the federally chartered secondary market opportunities designed expressly for areas with an exceptionally high median-home price. Current law recognizes high-cost states and their need for an increased conforming loan limit but is currently restricted to Hawaii, Alaska, Guam and the Virgin Islands.
Fannie Mae and Freddie Mac also announced new limits for multi-unit loans for 2004: two-family loans to $427,150; three-family loans to $516,300; and four-family loans to $641,650.