Maximum loan amount for Fannie Mae, Freddie Mac falls to US$625,500 from US$729,750, down payments may increase to 20%-30% from 3.5% as fewer borrowers qualify for FHA program

Lorena Madrigal

LOS ANGELES , October 4, 2011 (Industry Intelligence) – The maximum loan amount guaranteed by Fannie Mae and Freddie Mac has been lowered to US$625,500 from $729,750, beginning Oct. 1, MarketWatch reported Sept. 30.

Larger borrowers, who were previously eligible for a 3.5% down payment under a Federal Housing Administration (FHA) program, will lose that eligibility and see down payments rise to 20%-30%, according to Mike McMahon, managing director at Redwood Trust, Inc.

Although loan limits vary throughout the nation, they will fall between $271,050 and $625,500.

Bankrate.com senior financial analyst Greg McBride expects the number of larger borrowers to decrease because of this, reported MartketWatch.

According to the FHA, it would have had to turn down 33,000 borrowers, about $14 billion in mortgages, in 2010 had these limits been in place last year.

MF Global Inc. analyst Jaret Seiberg expects the homebuilders lobby and the National Association of Realtors to request that the higher loan limits be restored in 2012. Seiberg said the possibility of that happening is slim.

The primary source of this article is MarketWatch, New York, New York, on Sept. 30, 2011.

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