Buyers of homes in high-priced markets have some reason to cheer: the federal government recently extended through 2010 the maximum dollar amount for “conforming loans.” This will probably mean better options for borrowers who might otherwise have had to take out “jumbo” mortgages.Conforming loans meet all the guidelines of Fannie Mae and Freddie Mac, the government-controlled agencies that resell packages of loans to investors, and are therefore eligible for purchase by these agencies. Jumbo mortgages, issued in amounts above the government’s maximum, are nonconforming. Because lenders assume less risk in making conforming loans, the interest rates are usually lower. For much of the past two years, the government has, through Fannie and Freddie, agreed to buy mortgages of $729,500 or less for properties in high-cost housing areas like Manhattan and parts of northern New Jersey. That ceiling had been scheduled to be lowered to $625,500 at the end of this year, but last month Congress extended the higher limit through the end of 2010.
By Bob Tedeschi, Nov. 15, 2009 WSJ

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