Mortgage Market Minute: February 2011

Congress will ultimately decide whether Fannie and Freddie have a future, and whether the other changes could go into effect as soon as this fall. Here are the big three: Smaller mortgages In October, the maximum size of mortgages backed by Fannie and Freddie will shrink. (That's when the current limits are set to expire, and the president's report is calling for them to not be extended.) Currently, in high-cost cities like New York and San Francisco, homebuyers can borrow up to $729,750 for a single-family home; that amount drops 14% to $625,500. The $417,000 amount for more moderately priced areas will remain the same. Higher fees In November, the Federal Housing Administration could raise annual mortgage insurance premium fees by 0.25% for all borrowers, according to proposals. The hike comes out to an extra $250 per $100,000 of mortgage per year, which borrowers can pay upfront or have rolled into their mortgage. The new premium could be as high as 1.2%, up from a previous maximum of 0.95%. Bigger down payments Currently, borrowers can try to get a mortgage from a bank with just 5% down by taking on mortgage insurance – mostly because that mortgage is then sold off to Fannie Mae or Freddie Mac. That requirement would gradually increase to 10%, according to the proposals, but a Freddie Mac spokesman says no implementation details are available at this time.