Regulator Says No to Higher O.C. Loan Limits

Orange County mortgage shoppers didn’t get any help dealing with our lofty home prices from the Federal Housing Finance Agency, Fannie and Freddie’s regulator.

Last week, the FHFA, announced it would not increase its maximum conforming loan amount that the two mortgage giants can purchase from local lenders.

The last time Orange County saw an increase to its maximum conforming loan limits – those loans that can be sold to Fannie Mae or Freddie Mac – was in 2007, when the O.C. was designated as a high-cost area, giving birth to Fan and Fred’s high-balance loan limit of $729,750. The number was chopped down to a max of $625,500 in September 2011, where it still remains.

Today, Fannie and Freddie will purchase Orange County loans for up to $417,000 with just 3 percent down; and Fannie will purchase Orange County loans for up to $625,500 with just 5 percent down.

Even though you can find similar rates for jumbo loans (or loans greater than $625,500), one downside is you need to put at least 10 percent down.

You can purchase an O.C. home for just under $1.2 million with a 10.1 percent down payment right now. Or purchase a home for $1.7 million with just 15 percent down.

Consider that the median Orange County house price was $708,692 in October 2006, compared to $704,370 in October 2015, according the California Association of Realtors.

Believe it or not, national numbers closely mirror the O.C.’s experience, according to a chart released this week by the Mortgage Bankers Association. MBA cited several home prices indexes showing that U.S. home values in the third quarter of 2015 ranged from 96 percent to just over 100 percent of third quarter 2007 numbers.

Flat loan limits may not hold prices back, regardless. Prices might push up from wage gains.

“The good news is labor markets have tightened with just a 5 percent unemployment rate and may go lower. The silver lining (for Orange County) is people will be trading jobs, finding right jobs,” said Lynn Fisher, vice president of research at the MBA.

MBA forecasts a home price increase of 4 percent in 2016 which means that there may be a modest adjustment to the loan limits next year.