Fannie, Freddie high-cost loan limits raised to record $765,600

Federal regulator sets new “conforming” and “high-balance” loan limits for 2020, effective in January.

Go big or go home!

This week, conventional mortgage giants Fannie Mae and Freddie Mac got the green light to boost their 2020 high-balance loans 5.1% in high-cost Los Angeles and Orange counties from $726,525 to a whopping $765,600 maximum loan amount.

These limits have increased for the fourth straight year and are the highest limits ever allowed by the Federal Housing Finance Agency, F & F’s conservator and regulator.

San Diego County’s new high-cost loan limit is capped at $701,500. Ventura County will increase to $713,000.

The conforming loan limits for non-high cost areas like Riverside and San Bernardino counties – and for 34 other California counties — will rise to $510,400 from its current limit of $484,350.

The rates for conforming loans are about one-quarter to one-half percent cheaper than for high-balance mortgages.

Higher limits also are available for duplexes, triplexes and four-plexes. In Los Angeles and Orange counties, the loan limits are $980,325 for two-unit properties, $1,184,925 for three-unit properties and $1,472,550 for four-unit properties.

The limits for non-high-cost counties are $653,550 for duplexes, $789,950 for triplexes and $981,700 for four-plexes.

Some lenders will start funding loans based upon these new loan limits immediately.

The U.S. Housing and Urban Development Department is in the process of finalizing its FHA loan limits for 2020, a HUD spokesperson said.

Historically, the Federal Housing Administration has matched the new conventional loan limits for Los Angeles and Orange counties. FHA loan limits have lagged the Fannie and Freddie limits in San Bernardino and Riverside counties.

In certain circumstances, the Veterans Affairs Department will match the Federal Housing Finance Agency’s 2020 loan limit increases, VA spokesman Randal Noller said.

In my experience, FHA and VA have never allowed lenders to start the purchase or refinance process for higher loan amounts until January.

Increased loan limits mean some mortgage shoppers may now be able to turn their jumbo loans into conventional high-balance loans. And, some previous high-balance shoppers may be able to convert their loans to cheaper conforming loans.

Underwriting tends to be more lenient for conventional Fannie and Freddie loans. For example, required cash reserves are lower. Maximum debt ratios can go closer to 50%, while jumbos go to about 43%. And down payments can go as low as 5% of a home’s purchase price, compared with a minimum 10% down for the typical jumbo.

As far as mortgage rates and pricing goes, keep your eyes peeled. Don’t assume anything.

For well-qualified borrowers, banks sometimes offer high-balance loans through their jumbo portfolio loan programs for less than Fannie or Freddie high-balance pricing.

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Jeff Lazerson is a mortgage broker and adjunct professor at Saddleback College. He can be reached at 949-334-2424 or jlazerson@mortgagegrader.com.