There has been a lot of excitement in the past week about the new “conforming” loan limits for Fannie and Freddie loans. The new limits were announced as part of the American Recovery and Reinvestment Act of 2009 which the President signed into law on February 17, 2009. Realtors and potential home buyers and owners are happy that the new conforming loan limits was raised to $729,500 from $417,000. If you live where I live, in the San Francisco Bay area, and a few other high cost areas, there is good reason to be happy. But for most of the country this provision doesn’t change a things. It’s a good provision to be sure, but there is a lot of misinformation among the general public so we should put things in perspective.

The new loan limits up to which Fannie and Freddie are allowed to underwrite home mortgages are established by county. These limits are equal to the greater of 125% of the 2008 local area median home price or $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. Here are some fun facts:

• There are 3,142 counties in the U.S. (excluding protected territories such as Puerto Rico and the American Virgin Islands.)
• Only 275 counties, or 8.8%, will see loan limits raised above the previous $417,000.
• Only 73 counties, or 2.3%, will have loan limits of $729,750.
• The new average agency loan limit nationwide is just $430,322, a 3.2% increase.
• The 275 jumbo counties are spread across 29 states, but just 5 of those states (VA, MD, CA, AK and NJ) encompass almost 60% of these counties.

You can check your counties new loan limits on the OFHEO page.

UPDATE: As of the first week in May banks have begun rolling out the new “Super High Balance” Conforming loan programs. Pricing is only slightly higher than regular conforming but underwriting guidelines remain very tight. (I.e., you better have a good job and excellent credit scores.)