2011 Conforming Loan Limits Now $625,500

[Critical Loan Limit Update on 11/18/2011] As of today, loan limits for high-cost areas drop from $729,750 to $625,500. Here are new limits and rate spreads between each of the U.S.’s three loan tiers.

Late last week the Federal Reserve released its 2010 Home Mortgage Disclosure Act database that concluded that this loan limit drop will have only a “small” impact on mortgage originations going forward. Researchers at the Fed estimate that in 2010 just 1.3% of Fannie & Freddie mortgages fell between $625,500 and $729,750, but that an additional 2.1% of 2010 home-purchase loans and 2.4% of refis would “potentially” be affected by a decline in Federal Housing Administration (FHA) loan limits.

Government-backed loans—FHA, VA, Rural Housing Services loans, which Fed researchers call “nonconventional” loans—comprised 46% of purchase mortgages in 2010, compared to 48% the prior year. “The share of nonconventional loans in the home-purchase market peaked” in April 2010, per the Fed, when FHA raised its upfront fee by 50 basis points.