Friday, November 7, 2008

2009 Conforming Loan Limits Unchanged, FHFA Says

(Housing Wire) The conforming loan limit — the maximum size of loans that can be purchased by Fannie Mae (FNM: 0.7647 +7.70%) and Freddie Mac (FRE: 0.8896 +4.66%) — will remain at $417,000 during 2009, the Federal Housing Finance Agency announced Friday. The only areas where loan limits will change are considered “high-cost” areas; the new limits there are equal to 115 percent of the local median house prices and cannot exceed 150 percent of the standard limit of $625,000 for single-unit homes.

The national loan limit, as defined by provisions with in the Housing and Economic Recovery Act of 2008, is based on changes in average home prices over the previous year. It cannot decline from year to year, as provided by the act. The decision to lave the national limit unchanged - not increased - was influenced by declines in monthly and quarterly house price indexes over the past year, according to FHFA. Home prices have fallen in “virtually every” measure, with many showing larger declines than the 5.9 percent purchase-only index decline and the 1.7 percent all-transactions index decline seen over roughly the past 12-month period, FHFA said.

A report released by Altos Research LLC confirmed the most recent month in a long trend of home price declines. Altos announced on Friday home asking prices continued to fall in October - down 1.5 percent from the previous month. Although asking prices demonstrate the continued in a downward slump in the housing market, the FHFA is not authorized to lower the national loans limit. The only direction the Recovery Act allows it to take is a limit increase. FHFA has said it has not considered that move for 2009.

“FHFA has not yet determined whether it will continue to use a currently existing FHFA price index to gauge price movements in future years,” officials said in a media statement. “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.”

The new limits for “high-cost” areas go into effect for loans purchased by the GSEs in 2009, except for loans made eligible for purchase under the Economic Stimulus Act, which sets generally higher limits on these exceptions. Under the Stimulus Act, loans originated from mid-2007 through 2008 are limited to 125 percent of local price medians - up to a $729,750 maximum. Despite the discrepancy between the limits under the act and the new “high-cost” area limits, FHFA said in a statement that the higher limits will be favored for loans originated in the timeframe defined by the Stimulus Act.

Loan limits for two-, three-, and four-unit properties will remain at 2008 levels, as well, FHFA announced: $533,850 for two-unit, $645,300 for three-unit and $801,950 for four-unit properties.

FHFA used median house price estimates calculated by the Federal Housing Administration of the Department of Housing and Urban Development, as well as aggregated Radar Logic Inc. data and other information, to calculate loan limits. For anyone wishing to contest its median price estimates, HUD plans to allow a 30-day appeals period, details of which FHFA said FHA would announced later Friday in a mortgagee letter.

For more information, visit the Office of Federal Housing Enterprise Oversight Web site.

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