It is probably a relief to know mortgage loans have to follow rules of compliance in the United States. Both the lender and the borrower can be assured the loans are fair as a result. Created by the United States Congress, the required guidelines are set forth by a group of financial services corporations. Most people refer to these corporations as Government-Sponsored Enterprises, or GSEs.
Those loans that are found to be in compliance with GSE guidelines are known as conforming loans. Loans that do not meet these specific guidelines are simply called non-conforming loans. In addition, there is also something called a jumbo loan, which is a loan that does not meet GSE guidelines solely because the amount of the loan is above the limits set by the guidelines.
Before 1970, there really weren't any residential mortgage loan guidelines. Fannie Mae was authorized to purchase these types of loans as a lender in 1970 by the United States government. Fannie Mae collaborated with Freddie Mac to develop universal mortgage documents at that time. Fannie Mae and Freddie Mac also collaborated to develop conforming loan standards we still use today. Conforming loans are highly sought after by both Fannie Mae and Freddie Mac, so they have more liquidity than their non-conforming loan counterpart.
Only those loans that meet the criteria set by the Office of Federal Housing Enterprise Oversight are bought by Fannie Mae and Freddie Mac. Debt-to-income home buyer ratio limits and documents required before the loans can go through are examples of some criteria. The maximum loan amount is also considered a specific factor in that regard, based on the October-to-October changes in median home price. This makes demand for non-conforming loans quite drastically less as well, because Fannie Mae and Freddie Mac can only purchase, repackage and sell loans within the criteria set by the Office of Federal Housing Enterprise Oversight.
Also to note is that a temporary increase in the conforming loan limits for high-cost regions in the United States was incorporated into the 2008 economic stimulus package. While the bills were signed into law by President Bush on February 13, 2008, lenders were still choosing not to honor them as late as March 30, 2009. While it may not be something that directly affects potential home buyers, it is important to be aware of the underlying issues while considering to buy a house just the same.
Those loans that are found to be in compliance with GSE guidelines are known as conforming loans. Loans that do not meet these specific guidelines are simply called non-conforming loans. In addition, there is also something called a jumbo loan, which is a loan that does not meet GSE guidelines solely because the amount of the loan is above the limits set by the guidelines.
Before 1970, there really weren't any residential mortgage loan guidelines. Fannie Mae was authorized to purchase these types of loans as a lender in 1970 by the United States government. Fannie Mae collaborated with Freddie Mac to develop universal mortgage documents at that time. Fannie Mae and Freddie Mac also collaborated to develop conforming loan standards we still use today. Conforming loans are highly sought after by both Fannie Mae and Freddie Mac, so they have more liquidity than their non-conforming loan counterpart.
Only those loans that meet the criteria set by the Office of Federal Housing Enterprise Oversight are bought by Fannie Mae and Freddie Mac. Debt-to-income home buyer ratio limits and documents required before the loans can go through are examples of some criteria. The maximum loan amount is also considered a specific factor in that regard, based on the October-to-October changes in median home price. This makes demand for non-conforming loans quite drastically less as well, because Fannie Mae and Freddie Mac can only purchase, repackage and sell loans within the criteria set by the Office of Federal Housing Enterprise Oversight.
Also to note is that a temporary increase in the conforming loan limits for high-cost regions in the United States was incorporated into the 2008 economic stimulus package. While the bills were signed into law by President Bush on February 13, 2008, lenders were still choosing not to honor them as late as March 30, 2009. While it may not be something that directly affects potential home buyers, it is important to be aware of the underlying issues while considering to buy a house just the same.
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