VA Loan Limits May Be Reduced for 2015

Paul Stewart, SAMCAR Government Affairs Director | December 16, 2014

The 2015 VA loan limits have been released and there will be a new cap at $625,500 unless the law changes. This statutory authority was granted to VA in 2008, under Public Law 110-389, and is currently set to expire on December 31, 2014. If the authority expires, VA's effective loan limits will reset to Federal Housing Finance Agency's (FHFA) limit. The FHFA conforming loan limits currently range from a base of $417,000 to a high-cost-area limit of $625,500..

As the VA Circular 26-14-39 states 'in the event' Public Law 110-389 expires on 12/31/14 (which it's set to do) then the rules for the 'Maximum Loan Guaranty' add this new cap. This means, for example, the VA loan limit in San Mateo County will drop from $1,050,000 down to $625,500. In the past two years, the VA has done more than 700 loans in excess of $1 million and many others between $625,000 and $1 million.

If the loam limits are reduced, veterans will either need significantly larger down payments or may not be able to take advantage of the program. Reports note that considering VA's default rate and Funding Fee cohort year performance, there is no benefit to the government to dropping the limit. Interestingly, VA loans have historically been some of the best performing loans in the lending industry.

TAGGED: Loan Limits, VA Loans

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