The Office of Federal Housing Enterprise Oversight (OFHEO) has announced three actions regarding the calculation of the conforming loan limit, which establishes the maximum mortgage loan value eligible for purchase by Fannie Mae and Freddie Mac.
Based on provisions in the proposed guidance, any decreases in the current conforming loan limit will be deferred one year. If the index used to calculate the maximum loan level should increase, the amount of the increase in 2008 would be reduced by the decline calculated in 2006 of 0.16%, OFHEO says. Under no circumstance, however, would the maximum loan level for 2008 drop below the 2006 and 2007 limit of $417,000.
In addition, OFHEO has transmitted to the Federal Register revised Examination Guidance for procedures relating to the calculation of the conforming loan limit and implementation of increases or decreases in the limit. OFHEO currently seeks additional comment on the revised guidance within 30 days of its publication in the Federal Register.
According to OFHEO, other key provisions in the loan limit guidance include the following: Decreases must total more than 3% before a decrease would be implemented – a change from the proposed 1% de minimis amount. Also, if a loan is conforming at the time of origination, it remains conforming regardless of declines in the conforming loan limit, providing greater certainty for markets and asset securitization. For simplification, OFHEO adds, the conforming loan limit will be rounded down to the nearest $100.