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Conforming loan limit could stay at $417,000 in ’08

OFHEO proposes one-year lag time between prices, loan limit

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Federal regulators are proposing to leave the conforming loan limit for single-family homes at $417,000 in 2008, regardless of how steeply housing prices fall this year. The conforming loan limit -- which determines the maximum size mortgage loan eligible for purchase by Fannie Mae and Freddie Mac -- is tied to average home-price statistics released each November. To provide greater certainty for mortgage lenders and home buyers, last year OFHEO said it would allow the conforming loan limit to stay put at $417,000 in 2007, even if home prices fell in 2006. When the Federal Housing Finance Board (FHFB) announced that home prices had declined by a nearly imperceptible .16 percent, OFHEO did what it said it would, deferring what would have been a corresponding reduction in the conforming loan limit to $416,300. Now OFHEO proposes leaving the current limit in place next year if prices fall again in 2007, to provide lenders and home buyers with a year of lag time to prepare for any decrease...