What CUs Need to Know Before the Loan Limits Increase

Considerations your credit union should take on the conforming loan limits in Congress' Economic Stimulus Package.


Prime Alliance continues to follow Congress' Economic Stimulus Package. Our interest, and I am sure yours, is in the temporary increase in conforming loan limits that will result from enactment of this Bill. A week ago, the Senate passed its version of the Bill which is substantially the same as the House Bill. Next stop: the President's desk. Mr. Bush is expected to quickly sign this important legislation into law.

Conforming loan limits as well as FHA loan limits under the Bill increase not by a dollar amount, but according to a formula for Freddie Mac and Fannie Mae eligible loans: 125% percent of the area median price, but in no case to exceed 175% of the limitation for 2008. The limit will in no event decrease below the current conforming loan limits, however. GSE limits are estimated to increase in less than 50 MSAs across the country. The calculation for FHA loan limits is slightly different, yet increase as well according to a formula. The implications of the FHA increases are more broadly based, potentially affecting more borrowers and homeowners. If you are not yet FHA-ready, now is this time.

This temporary increase applies to all loans originated between July 1, 2007 and December 2008. Thanks to its retroactive nature, this change is a boon for lenders and borrowers alike. For lenders it's an opportunity to generate liquidity. Review your portfolios with an eye toward selling what were jumbo loans into the conforming market. An increase in liquidity, and a reduction in interest rate and credit risk are happy consequences of this Bill.

What's good for lenders is good, perhaps better, for members. The National Association of Realtors (NAR) estimated an increase in the conforming loan limit to $625,000 would forestall as many as 210,000 foreclosures. Some of those borrowers facing the loss of their home are credit union members. Now we can help.

Those members not facing foreclosure will appreciate the interest rate relief this market, and this Bill, provide. Offer to refinance members who have higher interest rate loans, or are in loan products that may not be best suited for them. It's also time to market to non-member homeowners. Credit unions didn't play the subprime game. We're the trusted, reliable lender whose time has come.

While the interest rate environment has conspired to ignite a refinance boomlet the likes of which have not been seen since earlier in this decade, the increase in loan limits may well add to the boom. It also has the potential to add more homebuyers to the market. Here, too, the NAR provides an estimate: a change in lending limits may add as many as 348,000 homebuyers to the market.

The new limits become effective after two things happen: The President must sign the Bill, which will happen as early as next week and the GSE's regulator must approve the process and procedures for its implementation. No estimate of when this will happen is yet available.

Prime Alliance is aggressively working on a solution to that will support these changing needs in the market place. Look for more details soon.



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Feb. 18, 2008


  • Can anyone provide a list of MSA''s that will see an increase and what that increase will be? All this info is nice but pratical application assistance would be more helpful!
  • Would love to find out what the increase will be for my area. I live in IL close to Chicago. I have been getting conflicting information on if I will be seeing any of the increase in the conforming loan limit. I will be getting a conventional loan, not a FHA.