FHFA Raises Loan Limits For Mortgages to be Acquired by Fannie, Freddie

In reaction to rising home prices, the Federal Housing Finance Agency (FHFA) has raised the loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2019.

In most of the U.S., the maximum conforming loan limit for one-unit properties will be $484,350, up from the current $453,100.

The FHFA’s third quarter home price index report shows that U.S. home prices increased an average of 6.3% from the end of the third quarter of 2017 to the end of the third quarter this year.

Therefore, the baseline maximum conforming loan limit in 2019 will increase by the same percentage.

“Home prices continued to rise in the third quarter but their upward pace is slowing somewhat,” says William Doerner, supervisory economist for the FHFA, in a statement.  “Rising mortgage rates have cooled down housing markets – several regions and over two-thirds of states are showing slower annual gains.”

The maximum loan limit in high-cost areas – where the local median home value exceeds the baseline conforming loan limit by more than 115% – the maximum loan limit will be higher than the baseline loan limit.

The Housing and Economic Recovery Act establishes the maximum loan limit in those areas as a multiple of the area median home value, while setting a “ceiling” on that limit of 150% of the baseline loan limit, the FHFA explains in a release.

Median home values generally increased in high-cost areas in 2018, driving up the maximum loan limits in many areas.

The new ceiling loan limit for one-unit properties in most high-cost areas will be $726,525 – or 150% of $484,350.

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 $726,525 for one-unit properties.

As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2019 in all but 47 counties or county equivalents in the U.S.

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