Maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2012 will remain at existing levels, the Federal Housing Finance Agency reported yesterday.
Only Fairfield County, Conn., will see a change in conforming loan limits; the affluent exurb of New York City saw its conforming loan limits increase by $26,450 from $575,000 to $601,450, largely from a rise in the local median home values.
The maximum conforming loan limits for one-unit properties, which generally have applied to loans originated since Oct. 1, are $417,000 in most locations, but are as high as $625,500 in certain high-cost areas in the contiguous United States. For loans originated prior to October, the maximum loan limit was as high as $729,750 in the contiguous U.S. However, that higher “ceiling” expired, although Congress this past week approved the higher conforming loan limits for FHA loans, but not Fannie Mae and Freddie Mac.
The 2012 loan limits are set under the permanent formula established under the Housing and Economic Recovery Act of 2008. HERA requires that the baseline limit be adjusted each year to reflect changes in the national average home price, but prohibits declines in the limit. If average home prices decline, then the baseline loan limit is to remain the same. In setting HERA limits for 2009, 2010 and 2011, FHFA said the national average home price declined over preceding years. As a result, the national loan limit was left unchanged. This year, the monthly and quarterly house price index series produced by FHFA show further national price declines and thus the baseline loan limit is again unchanged.
Under the HERA formula, FHFA said while other counties also saw increases in home prices, Fairfield County was the only one for which the increase ultimately produced higher loan limits after other HERA terms, such as statutory ceilings and floors on loan limits, were taken into account.
A description of how the 2012 loan limits were determined can be found at http://www.fhfa.gov/webfiles/22769/CTY112211.pdf.
FHFA said the $417.000 baseline limit was left unchanged based on declines in FHFA’s monthly and quarterly house price indexes. It said while the FHFA House Price Index has been used this year and in preceding years for assessing the national average price change, pursuant to terms set forth under HERA, it has evaluated a number of alternatives. FHFA plans to publish a Federal Register notice in the coming months that will proffer a specific methodology for measuring price changes for loan limit adjustment in the future. The notice, which will detail the methodology and also describe an alternative approach, will invite public comment.
HERA provisions set loan limits as a function of local area median home values. Where 115 percent of the local median home value exceeds the baseline loan limit, the local loan limit is set at 115 percent of the median home value. The local limit cannot be more than 50 percent above the baseline limit. In the contiguous U.S., the highest-possible local area loan limit for one-unit properties is thus $625,500 (150 percent of $417,000).
Loan limits for multi-unit properties were also left unchanged in all counties except Fairfield County, where they also increased). For most areas in the contiguous U.S., loan limits are $533,850, $645,300, and $801,950 for two-, three- and four-unit homes respectively. Outside the continental U.S., such as in Alaska, Hawaii, Guam and the Virgin Islands, the loan limits can be as high as $1.202 million for a four-unit home.
Source: The Mortgage Bankers Association