President Bush is expected to sign the economic stimulus bill this afternoon which will likely raise the conforming loan limit in San Francisco to $729,750 (at least “temporarily”). Don’t expect the new limits to take effect for at least 30 days or for the first closings to occur until a few weeks after that.
And in terms of the actual impact on mortgage rates, Julian Hebron of Residential Pacific Mortgage offers one perspective:
There has always been tiered pricing in the Jumbo market. Rates on Jumbo loans from $417k to $650k can be lower than rates on loans from $650k to $1m, and so forth as loan amounts rise into the ‘Super Jumbo’ realm above $1m. Early lender chatter is that when conforming limits rise, we may see higher rates on the ‘Super Conforming’ tier from $417k to $729k.
We also may see rates on all conforming loans rise as a result of the new loan limits. Right now, conforming 30yr fixed rates are about 1% lower than jumbo rates. Conforming 5yr, 7yr and 10yr ARMs are about .5% lower than jumbo rates. If we had a so-called Super Conforming pricing tier, or if conforming loan limits rose in general, expect the benefit of a new Super Conforming versus a jumbo to be cut in half or worse. This might not happen, but such adjustments are a normal part of open market pricing, so just be aware of it.
As always, only time (and the traders) will tell.
UPDATE: Bush has signed the bill.
UPDATE: In response to a reader’s question about timing, keep in mind that the Secretary of Housing and Urban Development now has 30 days to establish official median home prices for the high cost areas (the first step in calculating the new conforming loan limits) and updated underwriting guidelines still need to be debated, drafted and distributed.
∙ Conforming Loan Limits: A Placeholder For Discussion And Analysis [SocketSite]
∙ Bush Signs $168 Billion Measure Designed to Stimulate Economy [Bloomberg]