FHFA to Raise Conforming Loan Limits for First Time Since 2006
November 29, 2016
The Federal Housing Finance Agency (FHFA) announced that the maximum conforming loan limits for single-family mortgages acquired by Fannie Mae and Freddie Mac in 2017 will increase to $424,100 from $417,000 in most of the country. This will be the first increase in the baseline loan limit since 2006.
The new limits are effective for whole loans delivered, and mortgage loans delivered into MBS with pool issue dates, on or after Jan. 1, 2017.
The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit of $417,000 and requires this limit to be adjusted each year to reflect the changes in the national average home price. Until this year, the baseline loan limit had not been increased because the average U.S. home price remained below the level achieved in the third quarter of 2007.
The FHFA’s third quarter 2016 House Price Index (HPI) reported that average home prices are now above level in the third quarter of 2007. The expanded-data HPI value for the third quarter of 2016 was roughly 1.7 percent above the value for the third quarter of 2007.
High-cost Areas
In areas where 115 percent of the local median home value exceeds the baseline loan limit, the maximum area loan limit will be higher. HERA sets the maximum loan limit as a function of the area median home value, while setting a "ceiling" on that limit of 150 percent of the baseline loan limit.
This year, median home values generally rose in high-cost areas. Because the baseline loan limit will be higher in 2017, the new ceiling limit will also be higher. The new ceiling loan limit, which applies in areas with the most expensive homes, will be $636,150 (150 percent of $424,100) for one-unit properties in the contiguous U.S.
Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $636,150 for one-unit properties, but actual loan limits may be higher in some specific locations.
County-level Data
As a result of generally rising home values, the increase in baseline loan limit, and the rise in the ceiling loan limit, the maximum loan limit rose in all but 87 counties (or county equivalents) in the country.
A list of the 2017 maximum conforming loan limits for all counties and county-equivalent areas in the country can be found here. A map showing the maximum loan limits across the country can be found here.
Contact ALTA at 202-296-3671 or [email protected].