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GSEs’ Maximum Conforming Loan Limits Will Remain Largely Unchanged for 2016

money-stepsThe Federal Housing Finance Agency (FHFA) announced Wednesday that Freddie Mac and Fannie Mae's maximum conforming loan limits will be largely unchanged in 2016, except some higher-priced counties.

According to the Agency, the maximum conforming loan limits, which  determine the maximum size of a mortgage that Fannie Mae and Freddie Mac can guarantee, will remain at the current level of $417,000 for one-unit properties for mortgages acquired by the GSEs in 2016 .

The FHFA noted that the Housing and Economic Recovery Act of 2008 (HERA) deemed the baseline loan limit to be $417,000. The rule also mandated that "after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels," the FHFA stated.

The FHFA reported that the current loan limit of $417,000 will not change because the Agency "determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007."

In a letter to the Federal Housing Finance Agency (FHFA), the National Association of Federal Credit Unions (NAFCU) urged the FHFA to keep the conforming loan limit at its current baseline rate of $417,000 and not let the limit drop any lower.

"NAFCU believes the current 2015 limits should be kept in effect in order to avoid a disruption to the national housing market that is still recovering," Subramanian said. "NAFCU’s economic research team has concluded that while home sales are widely expected to improve in 2015 as the labor market improves, the exit of many investors from the market and the lack of first-time homebuyers represent two issues of concern for the coming year. Sudden or drastic changes to the conforming loan limit rate for the Enterprises could hamper this recovery."

At least one organization, the California Association of Realtors (CAR), was not thrilled with the news that the loan limits will not be raised in 2016.

"CAR is disappointed that the FHFA didn't raise the Fannie Mae and Freddie Mac conforming loan limits for next year," said CAR President Ziggy Zicarelli.  "Home prices in California have risen sharply over the past four years, yet conforming loan limits haven't changed during that time. Not increasing the loan limits will hurt California's housing market, further exacerbating housing affordability and preventing tens of thousands of California homebuyers from a chance at homeownership."

However, the FHFA does intend to raise that number a bit in 39 counties where housing costs are a bit higher.

Depending on the area's median home value, HERA will provide higher loan limits in high-cost counties, FHFA said. In 39 specific high-cost counties, where home values rose in the last year, the conforming loan limit will be increased.

"Although other counties also experienced home value increases in 2015, after other elements of the HERA formula—such as the statutory ceiling and floor on limits—were accounted for, these local-area limits were left unchanged," the FHFA explained.

According to the FHFA, several counties in California, Colorado, Massachusetts, New Hampshire, Tennessee, and Washington will all see their conforming loan limit raised in 2016.

Click here to view the FHFA's complete list.

About Author: Xhevrije West

Xhevrije West is a talented writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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