Conforming Loan Limit To Remain At $417K In Most Areas

FHFA announced today that the conforming limit of $417,000 will remain the same for 2009 in most areas:

WASHINGTON, DC – The Federal Housing Finance Agency (FHFA) today announced the conforming loan limit will remain $417,000 for 2009 for most areas in the U.S. but specified higher limits in certain cities and counties. The conforming loan limit is the maximum size of loans that Fannie Mae and Freddie Mac can purchase in 2009.

According to provisions of the Housing and Economic Recovery Act of 2008 (HERA), the national loan limit is set based on changes in average home prices over the previous year, but cannot decline from year to year. Loan limits for two-, three-, and four-unit properties in 2009 will remain at 2008 levels as well: $533,850, $645,300, and $801,950 respectively, for homes in the continental U.S.

The national limit was left unchanged at $417,000 based on declines in FHFA’s monthly and quarterly house price indexes over the past year. The monthly purchase-only index declined 5.9 percent over the 12 months ending August 2008, and the quarterly all-transactions index dropped 1.7 percent from second quarter 2007 to second quarter 2008. Virtually every other measure of house prices has also fallen, with many showing even larger declines. FHFA has not yet determined whether it will continue to use a currently existing FHFA price index to gauge price movements in future years. For this year, however, all reliable metrics point to lower prices, and a price decline of any size is sufficient to determine that the national limit will not change.

 

 

 

 

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1 Comment for this entry

  1. John M. says:
    November 7, 2008 at 10:59 AM

    It’s now almost two years since we posted OFHEO Change Could Shrink Jumbo Market (Nov 16, 2006). Well, nobody is talking about lowering the conforming limit, and there isn’t a Jumbo sector anymore to speak of. It was funny in retrospect watching the regulator trying to deal with “negative appreciation.” The enabling legislation had “house prices always go up” right in the bill’s assumptions.

    We have certainly come a long way in the last 102 weeks!
    —————————
    meanwhile, BW isn’t sounding very optimistic:

    “New mortgage caps reduce options in pricey metros”, by Alan Zibel, BusinessWeek, November 7, 2008.

    People looking to buy more expensive homes next year will have fewer options to find financing because Fannie Mae and Freddie Mac will have lower limits on the size of loans they can buy.

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