Unless Congress says otherwise, temporary limits for mortgages eligible for purchase by Fannie Mae and Freddie Mac or Federal Housing Administration loan guarantees will be rolled back to no more than $625,500 in high-cost areas beginning Jan. 1, federal regulators say.
The National Association of Realtors and other housing industry groups have urged Congress to make permanent the $729,750 limit for high-cost areas adopted by Congress in February as part of an economic stimulus package (see story).
The bill allows FHA to guarantee and Fannie and Freddie to purchase loans of up to 115 percent of the median home price for a given area after Jan. 1, as determined by the Federal Housing Finance Agency (FHFA). As of Jan. 1, the ceiling for both FHA loan guarantees and Fannie and Freddie will be reduced to 150 percent of the $417,000 conforming loan limit, which is also set by FHFA.
FHFA officials say the conforming loan limit will remain at $417,000 next year, although a home-price index maintained by the agency showed a 5.9 percent decline in home prices over the 12 months ending August 2008.
Although federal officials had previously proposed lowering the conforming loan limit in conjunction with home-price declines, in passing the Housing and Economic Recovery Act of 2008 (HERA) in July, Congress mandated that the limit can only move in one direction: up.
The conforming loan limit for single-family homes will remain at $417,000 until home prices make up recent losses and see additional appreciation. Loan limits for two-, three- and four-unit properties in 2009 will remain at 2008 levels as well: $533,850, $645,300 and $801,950, respectively, in the continental U.S.
Limits will remain higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands ranging from $625,500 to $721,050 for one-unit properties FHFA has published a spreadsheet listing conforming loan limits after Jan. 1 for Fannie and Freddie in all U.S. counties, and a list of high cost areas where the limit will continue to exceed $417,000.
The U.S. Department of Housing and Urban Development, in announcing the FHA limits set to take effect Jan. 1, said the new $625,500 maximum in high cost areas is still greater than the previous $362,790 limit for FHA loan guarantees. FHA will also continue to be able to guarantee loans of up to $271,050 in normal markets in 2009, compared with a "floor" of $200,160 in 2007.
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