Washington, D.C – for the first time in the history of the housing crisis, the FHFA announced an increase in the maximum conforming loan limits (the limit placed on the maximum sized loan) to be acquired by both Federal National Mortgage Association and Federal Home Loan Mortgage Corporation in 2017.
On Wednesday, November 23, 2016, the Federal Housing Finance Agency announced that in most countries, the Fannie Mae and Freddie Mac maximum loan limit will increase to $424,100 as compared to previous 10 years limit amount of $417,000, for single-family homes. Yes, this will be the first increase since 2006.
An increase in the conforming loan limit is determined by the HERA (Housing and Economic Recovery Act of 2008) which was designed to renew public confidence in Fannie and Freddie. HERA established the loan limit of $417,000 and mandated that the increase will not take place until housing prices come back to pre-decline levels.
The Federal housing agency noted the Home Price Index for 2016 third quarters, the value of which raised to 1.7% above the 2007 third quarter and concludes that now an average of US home prices are above 2007 third quarter level, which indicates that the baseline loan limits can be increased by that percentage.
As discussed above, the conforming loan limits for most countries will rise from $417,000 to $424,000, the limits will also be increasing for “high-cost areas,” where the 115% home value generally rose to the baseline loan limit, during this year.
A new loan limit for one-unit properties situated in areas with most luxurious homes, is set as of $636,150 (150% of $424,100).
As for Guam, Alaska, Hawaii and the United States Virgin Islands, there are different loan limits set as per the US Special Statutory Provisions. According to FHFA, the baseline limit will be set to $636,150 for single-unit homes, but for specific locations the actual loan limit may be set higher.
William E.Brown, the NAR president said, “The rise in conforming loan limits is a year’s debate.”
The National Association of Realtors president further added, “An increase is a much-awaited recognition for high-cost areas and is a helping hand to low-income or first-time borrowers in the market for FHA mortgages. However, the credit will remain tight, but the decision will motivate majority home buyers in their dream of home ownership.”