DEFINITION of 'Conforming Loan'

A mortgage that is equal to or less than the dollar amount established by the conforming loan limit set by Fannie Mae and Freddie Mac's Federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO) and meets the funding criteria of Freddie Mac and Fannie Mae.

BREAKING DOWN 'Conforming Loan'

The term "conforming" is most often used when speaking specifically about a mortgage amount; however, the terms "conforming" and "conventional" are frequently used interchangeably. Mortgages that exceed the conforming loan limit are classified as non-conforming or jumbo mortgages.

OFHEO, which sets the conforming loan limit on an annual basis, has regulatory oversight to ensure that Fannie Mae and Freddie Mac fulfill their charters and missions of promoting homeownership for lower income and middle class Americans. OFHEO uses the October to October percentage increase/decrease in average housing prices in the Monthly Interest Rate Survey of the Federal Housing Finance Board (FHFB) to adjust the conforming loan limits for the subsequent year.

RELATED TERMS
  1. Conforming Loan Limit

    The limit on the size of a mortgage which Fannie Mae and Freddie ...
  2. Maximum Loan Amount

    Describes the maximum amount that a borrower can borrow. The ...
  3. Nonconforming Mortgage

    A mortgage that does not meet the guidelines of Government Sponsored ...
  4. Agency Swap Program

    A form of securitization whereby single-family residential mortgages ...
  5. House Price Index - HPI

    A broad measure of the movement of single-family house prices ...
Related Articles
  1. Investing

    Fannie Mae and Freddie Mac, Boon Or Boom?

    These two companies are crucial to the mortgage market, but are they ticking timebombs?
  2. Insights

    Fannie Mae, Freddie Mac And The Credit Crisis Of 2008

    Is the U.S. Congress' failure to rein in these mortgage giants to blame for the financial fallout?
  3. Investing

    Should You Invest In Fannie Mae Stock?

    If you're risk-adverse, you might want to avoid investing in Fannie Mae. But if you're up for it, high risk could translate to high reward.
  4. Personal Finance

    When You Need a Jumbo or Super-Jumbo Mortgage

    Rising housing prices have made so-called jumbo and super-jumbo loans a necessity for more homebuyers.
  5. Investing

    The Top 5 Fannie Mae Shareholders (FNMA)

    Find about the individuals, funds and companies that are top shareholders of Fannie Mae stock. Learn about their profiles and their relationships with Fannie Mae.
  6. Personal Finance

    Conventional Mortgage

    A conventional mortgage is any type of homebuyer's load that is not offered or secured by a government entity but rather available through a private lender.
  7. Personal Finance

    Jumbo Loan

    A mortgage with a loan amount exceeding the conforming loan limits set by the Federal Housing Finance Agency (FHFA) and, therefore, not eligible to be purchased, guaranteed or securitized by ...
  8. Insights

    Top 6 U.S. Government Financial Bailouts

    U.S. bailouts date all the way back to 1792. Learn how the biggest ones affected the economy.
RELATED FAQS
  1. How do you use the FNMA selling guide?

    Learn about Fannie Mae Selling Guide and find out details about how its parts provide support to the business relationship ... Read Answer >>
  2. How does a decline in housing prices affect the banking sector?

    Learn about the affects on banks when housing prices go down, including loan delinquency rates, mortgage foreclosures, and ... Read Answer >>
  3. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
Hot Definitions
  1. Benchmark

    A standard against which the performance of a security, mutual fund or investment manager can be measured.
  2. Mobile Wallet

    Mobile wallet is a virtual wallet that stores payment card information on a mobile device.
  3. Leverage

    1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. ...
  4. Trumponomics

    Trumponomics is a term for the economic policies of President Donald Trump.
  5. Universal Health Care Coverage

    An organized healthcare system that provides healthcare benefits to all persons in a specified region. Many countries, such ...
  6. Davos World Economic Forum

    The annual meeting of the World Economic Forum hosted at Davos—a small ski town in Switzerland—in January each year is among ...
Trading Center