In the United States, a conforming loan is a mortgage loan that conforms to GSE guidelines.[1]
In general, any loan which does not meet guidelines is a non-conforming loan. A loan which does not meet guidelines specifically because the loan amount exceeds the guideline limits is known as a jumbo loan.[1]
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Starting in 1970, Fannie Mae was authorized by the United States Government to purchase residential mortgage loans. Fannie Mae worked with Freddie Mac to develop uniform mortgage documents and national standards for what would come to be known as a conforming loan.[1]
Fannie Mae and Freddie Mac are continuously in the market for conforming loans; because of this, conforming loans benefit from greater liquidity than non-conforming loans.[1]
The Office of Federal Housing Enterprise Oversight (OFHEO) set the criteria on what constitutes a conforming loan limit that Fannie Mae and Freddie Mac can buy. Criteria include debt-to-income ratio limits and documentation requirements. The maximum loan amount is set based on the October-to-October changes in median home price, above which a mortgage is considered a jumbo loan, and typically has higher rates associated with it. This is because both Fannie Mae and Freddie Mac only buy loans that are conforming, to repackage into the secondary market, making the demand for a non-conforming loan much less. By virtue of the laws of supply and demand, then, it is harder for lenders to sell the loans, thus it would cost more to the consumers (typically 1/4 to 1/2 of a percent.)
Per Fannie Mae:[2]
| Year | Historical Conventional Loan Limits | High Cost Area | ||||
|---|---|---|---|---|---|---|
| Single Family | Two Family | Three Family | Four Family | Second Loan | Single Family | |
| 2009 | $ 417,000 | $ 533,850 | $ 645,300 | $ 801,950 | $ 208,500 | $ 625,500 |
| 2008 | $ 417,000 | $ 533,850 | $ 645,300 | $ 801,950 | $ 208,500 | $ 625,500 |
| 2007 | $ 417,000 | $ 533,850 | $ 645,300 | $ 801,950 | $ 208,500 | $ 625,500 |
| 2006 | $ 417,000 | $ 533,850 | $ 645,300 | $ 801,950 | $ 208,500 | $ 625,500 |
| 2005 | $ 359,650 | $ 460,400 | $ 556,500 | $ 691,600 | $ 179,825 | $ 539,475 |
| 2004 | $ 333,700 | $ 427,150 | $ 516,300 | $ 641,650 | $ 166,850 | $ 500,550 |
| 2003 | $ 322,700 | $ 413,100 | $ 499,300 | $ 620,500 | $ 161,350 | $ 484,050 |
| 2002 | $ 300,700 | $ 384,900 | $ 465,200 | $ 578,150 | $ 150,350 | $ 451,050 |
| 2001 | $ 275,000 | $ 351,950 | $ 425,400 | $ 528,700 | $ 137,500 | $ 412,500 |
| 2000 | $ 252,700 | $ 323,400 | $ 390,900 | $ 485,800 | $ 126,350 | $ 379,050 |
| 1999 | $ 240,000 | $ 307,100 | $ 371,200 | $ 461,350 | $ 120,000 | $ 360,000 |
| 1998 | $ 227,150 | $ 290,650 | $ 351,300 | $ 436,600 | $ 113,575 | $ 340,725 |
| 1997 | $ 214,600 | $ 274,550 | $ 331,850 | $ 412,450 | $ 107,300 | $ 321,900 |
| 1996 | $ 207,000 | $ 264,750 | $ 320,050 | $ 397,800 | $ 103,500 | $ 310,500 |
| 1995 | $ 203,150 | $ 259,850 | $ 314,100 | $ 390,400 | $ 101,575 | $ 304,725 |
| 1994 | $ 203,150 | $ 259,850 | $ 314,100 | $ 390,400 | $ 101,575 | $ 304,725 |
| 1993 | $ 203,150 | $ 259,850 | $ 314,100 | $ 390,400 | $ 101,575 | $ 304,725 |
| 1992 | $ 202,300 | $ 258,800 | $ 312,800 | $ 388,800 | $ 101,150 | $ 303,450 |
| 1991 | $ 191,250 | $ 244,650 | $ 295,650 | $ 367,500 | $ 95,625 | $ 286,875 |
| 1990 | $ 187,450 | $ 239,750 | $ 289,750 | $ 360,150 | $ 93,725 | $ 281,175 |
| 1989 | $ 187,600 | $ 239,950 | $ 290,000 | $ 360,450 | $ 93,800 | $ 281,400 |
| 1988 | $ 168,700 | $ 215,800 | $ 260,800 | $ 324,150 | $ 84,350 | $ 253,050 |
| 1987 | $ 153,100 | $ 195,850 | $ 236,650 | $ 294,150 | $ 76,550 | $ 229,650 |
| 1986 | $ 133,250 | $ 170,450 | $ 205,950 | $ 256,000 | $ 66,625 | $ 199,875 |
| 1985 | $ 115,300 | $ 147,500 | $ 178,200 | $ 221,500 | $ 57,650 | $ 172,950 |
| 1984 | $ 114,000 | $ 145,800 | $ 176,100 | $ 218,900 | $ 57,000 | $ 171,000 |
| 1983 | $ 108,300 | $ 138,500 | $ 167,200 | $ 207,900 | $ 108,300 | $ 162,450 |
| 1982 | $ 107,000 | $ 136,800 | $ 165,100 | $ 205,300 | $ 107,000 | $ 160,500 |
| 1981 | $ 98,500 | $ 126,000 | $ 152,000 | $ 189,000 | $ 98,500 | $ 147,750 |
| 1980 | $ 93,750 | $ 120,000 | $ 145,000 | $ 180,000 | N/A | $ 140,625 |
| Limits for Alaska, Hawaii, Virgin Islands and Guam are 50% higher. Virgin Islands was designated a high cost area in 1992 and Guam in 2001.
Prior to 1984, second mortgage limits were the same as first mortgage limits. Subsequent legislation reduced the limits to 50% of first mortgage limits. Fannie Mae had no second mortgage program before 1981. |
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A temporary increase in the Conforming Loan Limits for high-cost areas of living has been incorporated into the 2008 economic stimulus package. Congress has authorized an increase of the single family residences limits to the lesser of $729,750 or 125% of the median home value within the metropolitan statistical area (MSA). High-cost loans are only available through FHA loans.
The bill was signed into law by President Bush on February 13, 2008,[3] but the new rates are still not being honored by any lenders (as of March 30, 2009).
The new Jumbo-Conforming program has been adopted by Fannie Mae and Freddie Mac effective April 1, 2008 until December 31, 2010.[4]