What happens to conforming loan limits in areas where home prices have declined significantly?
Correct Answer
B) Limits can decrease but not below the baseline conforming loan limit
When home prices decline, conforming loan limits can decrease in high-cost areas, but they cannot fall below the baseline conforming loan limit that applies to most of the country. This provides a floor to ensure continued access to conforming loans even in declining markets.
Why This Is the Correct Answer
When home prices decline, conforming loan limits can decrease in high-cost areas, but they cannot fall below the baseline conforming loan limit that applies to most of the country. This provides a floor to ensure continued access to conforming loans even in declining markets.
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A borrower's home is worth $400,000 with an existing first mortgage balance of $250,000. If a lender's policy allows a maximum combined loan-to-value (CLTV) ratio of 80% for HELOCs, what is the maximum HELOC amount available?
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