Conforming Loan limits extended

Conforming loan limits for high-cost areas of the United States will remain at $729,750 through the end of 2010 following action in the House and Senate this week to extend the ability of Fannie Mae, Freddie Mac and the Federal Housing Administration to make and purchase those bigger loans.The higher limits were set to expire Dec. 31. The extension removes some year-end uncertainty for mortgage companies, which had already been preparing for lower limits. Without the new law, the high-cost loan limit would have fallen back to $625,500."Given the lack of a private secondary mortgage market, FHA, Fannie Mae and Freddie Mac are pretty much the only game in town," said Robert Story Jr., chairman of the Mortgage Bankers Association. "Extending the current loan limits through 2010 will allow more loans to qualify for these important programs and will help keep mortgage credit more accessible and affordable for qualified borrowers.""As we try to maintain the momentum of the housing recovery, providing affordable financing for qualified borrowers is critical. Extending the loan limits, along with other initiatives such as extending and expanding the home-buyer tax credit, will help restore stability to the housing and mortgage markets," he said.The jumbo mortgage market, loans that are above the Fannie/Freddie/FHA limits, virtually froze in the credit crunch of the last year, limiting the ability of borrowers and buyers in many cities to purchase or refinance homes. The higher limits, along with efforts by the Federal Reserve and Treasury to buy up mortgage securities, was meant to maintain liquidity in the mortgage markets.Fannie and Freddie, though, have there own problems. They are held in receivership by the government, and the debate over their future is a contentious one. Legislation to overhaul the mortgage agencies could come next year, but its shape is anything but certain.In the meantime, the FHA has become the lender of choice. As much as one-third of new mortgages today are being underwritten by the agency, which does not provide the loans but offers an insurance guarantee backed by the U.S. to lenders, with some lenders reporting 50% or more of their business is with the FHA.That has skeptics, who cite troubling default ratios in recent FHA loans, worried that the next big bailout will be of that agency.-- Steve Kerch, assistant managing editor/personal financeHOME-BUYER TAX CREDIT IS ADMINISTRATIVE NIGHTMARELast November, J. Russell George, the Treasury Inspector General for Tax Administration, warned the Internal Revenue Service that if they didn't ask for documentation from people filing for the first-time home-buyer credit, there would be fraud. The IRS ignored the advice. The result? The IRS doled out about $620 million to ineligible filers. Big deal, you might say. How does it affect me? Well, thanks to the problems, the IRS is now checking every return by hand.If you're among the millions of people who bought or plan to buy a first home in 2009, be prepared for long delays in getting your tax refund sent to you
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