Breaking News: First Increase in Loan Limits Since 2006

  • December 09, 2016

Since the Housing and Economic Recovery Act (HERA) of 2008 established the baseline loan limit of $417,000 there has not been an increase in loan limits.  When instituted, HERA stated the baseline loan limit would not rise until the average US home price rebounded to a pre-decline level.  Until this year, the average US home price was below the level achieved in Q3 of 2007. 

According to Fannie Mae’s website:

The general loan limits for 2017 have increased and apply to loans delivered to Fannie Mae in 2017 (even if originated prior to 1/1/2017). This is the first time the base loan limits have increased since 2006. Refer to Lender Letter LL-2016-05 for specific requirements.

Conforming base limits are up to $424,100 from $416,00 and high-cost area limits (like Alaska, Hawaii, etc.) are up to $636,150.  The new limits are effective for loans delivered on or after January 1, 2017.  The Federal Housing Finance Agency’s (FHFA) Home Price Index (HPI) indicated that home values are up 6.1%.  Lenders can use loan limits to measure home values.

The increase in conforming limits has the potential to make it easier and more affordable for first-time homebuyers to enter the market.  However, if Congress attempts to restrict government-backed loans, they will have a lesser impact.  Conforming loan limits serve as a symbolic benchmark but do not have a bearing on non-QM loans, portfolio product, or on non-agency product. 

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