Fannie Mae Raises Loan Limit

Real Estate

Fannie Mae is a Government Enterprise that helps keep the mortgage economy fluid, and overall keeps the housing market afloat when it otherwise wouldn't be.  After a stellar 3rd quarter, Fannie Mae is raising their loan limit to over $510k on average.  This is a near $100k increase since 2016.  This is after a ten year hiatus of raises during the last recession. 

 

Fannie Mae, Freddie Mac loan limit increases to more than $510,000

Conforming loan limit has now increased by nearly $100,000 since 2016

November 26, 2019, 11:39 am By Kelsey Ramírez article originally published here

The Federal Housing Finance Agencyannounced Tuesday that it is raising the conforming loan limits for Fannie Mae andFreddie Mac to more than $510,000.  In most of the U.S., the 2020 maximum conforming loan limit will be raised to $510,400, up from 2019’s level to $484,350.  This marks the fourth straight year that the FHFA has increased the conforming loan limits after not increasing them for an entire decade from 2006 to 2016.

In 2016, the FHFA increased the Fannie and Freddie conforming loan limit for the first time in 10 years, and since then, the loan limit has gone up by $93,400.  Back in 2016, the FHFA increased the conforming loan limits from $417,000 to $424,100. Then, the next year, the FHFA raised the loan limits from $424,100 to $453,100 for 2018. And in 2018, theFHFA increased the loan limit from $453,100 to $484,350 for 2019.  And now, loan limits will top $510,000.  The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.

Data from FHFA shows that home pricesincreased by 5.38% on average between the third quarter of 2018 and the third quarter of 2019. Therefore, the baseline maximum conforming loan limit in 2020 will increase by the same percentage.  For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. HERA 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.

Median home values generally increased in high-cost areas in 2019, 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 $765,600 — or 150% of $510,400.

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 $765,600 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 2020 in all but 43 counties or county equivalents in the U.S.

 Please see Fannie Mae or Freddie Mac to learn more about what they do for our economy.