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Jumbo Conforming Loan Originations 2013 YTD

The Minimal yet Targeted Impact of the HERA High Cost Loan Limits in Today’s Market

Kathryn Dobbyn    |    Housing Trends, Mortgage Performance

Roughly two years ago, there was a fierce debate amongst housing policy experts regarding the future of conforming loan limits brought on by the oncoming expiration of the American Recovery and Reinvestment Act (ARRA) of 2009. ARRA had temporarily raised the conforming loan limit for high-cost areas to $729,000 from mid-2009 to late 2011 and there was much consternation over whether or not to extend the duration of the higher loan limits. In the end, the bill was not extended and the loan limits for high-cost areas fell back down to the lower limits set forth in the Housing and Economic Recovery Act of 2008 (HERA), which are calculated annually as a function of median house prices in local areas. Now that November is here, the time of year when updated conforming loan limits are traditionally announced, and as another fierce debate has begun around the future of the conforming loan limits, I have decided that it is a good time to look at the impact of the HERA high cost loan limits on today’s lending environment. This interactive chart shows either the count of HERA jumbo conforming mortgage originations or the jumbo conforming origination share as a percent of total mortgage originations. The variable can be chosen by using the drop down box on the top right of the chart. The variables have been measured for both refinances and purchases using 2013 year-to-date mortgage originations, through August 2013, for states with more than 50 jumbo conforming originations. Nationally, the HERA high-cost loan limits have had limited impact, with only 1.7 percent of all originations falling under the jumbo conforming definition. That being said, the jumbo conforming limits were not meant to have a broad national impact, but rather play a targeted role in high-cost housing markets. It comes as no surprise then that California has the highest number of jumbo conforming mortgage originations. With 68,000 loans, over 60 percent of jumbo conforming mortgage originations come from California alone. Further, slightly fewer than 10 percent of all California mortgage originations are jumbo conforming loans and roughly two-thirds of California jumbo conforming mortgage originations are refinances. The District of Columbia has the highest share of jumbo conforming mortgage originations (18 percent), although the level is rather small with just over 2,000 jumbo conforming mortgage originations so far in 2013. Taken as a whole, the District of Columbia, Maryland and Virginia have enjoyed the benefits of HERA with 18,000 jumbo conforming mortgage originations primarily located in the Baltimore-Washington metropolitan areas. The New York – New Jersey metropolitan area is similarly the source of the combined 15,000 jumbo conforming mortgage originations in New York and New Jersey. It has been two interesting years since ARRA expired and the mortgage market is currently facing many unknowns, particularly in the regulatory arena. As the debate regarding changes to the conforming loan limits is bound to continue for some time, it is helpful to note that at least for the high-cost areas the impact of the current limits has thus far been minimal, yet highly targeted.