Good article from housing wire about the Federal Housing Finance Agency increasing conforming loan limits in 2017.
FHFA increases conforming loan limits for first time since 2006
2017 loan limits rise across the country
November 23, 2016 Ben Lane
For the first time since the housing crisis, the Federal Housing Finance Agency is increasing the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2017.
For much of the country, the Fannie Mae and Freddie Mac loan limit remained at $417,000 for one-unit properties (or single-family homes) in 2016, just as it had for the previous 10 years.
The FHFA announced Wednesday that for 2017, it is increasing the loan limit from $417,000 to $424,100 for single-family homes.
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.
The FHFA noted that until this year, the average U.S. home price remained below the level achieved in the third quarter of 2007, which it designates as the pre-decline price level, and therefore the baseline loan limit had not been increased.
But as the FHFA noted earlier Wednesday, its Home Price Index (HPI) for the third quarter of 2016 makes it “clear” that average home prices are now above the level of the third quarter of 2007, which means that the conforming loan limits can be increased.
According to the FHFA, the expanded-data HPI value for the third quarter of 2016 was approximately 1.7% above the value for the third quarter of 2007, meaning the baseline loan limit will increase by that same percentage.
As noted above, the conforming loan limits for much of the country will increase from $417,000 to $424,100.
Loan limits will also be increasing in what the FHFA calls “high-cost areas,” where 115% of the local median home value exceeds the baseline loan limit.
As the FHFA notes, median home values generally rose in high-cost areas during this year.
According to the FHFA, the new ceiling loan limit, which applies in areas with the most expensive homes, will be $636,150 (which is 150% of $424,100) for one-unit properties in the contiguous U.S.