The conforming loan limit officially goes up on January 1.

Surge in Home Prices Fueling Predictions of Increase to Fannie & Freddie Conforming Loan Limits

The Federal Housing Finance Agency FHFA typically releases its conforming loan limit for the coming year in November when it publishes its FHFA’s House Price Index (HPI).

In November of last year, the FHFA increased Fannie and Freddie’s 2021 baseline conforming loan limit for single-family homes to $548,250, an increase of +7.4% or an increase of $37,850.

Since the baseline conforming loan limit is joined at the hip to national average home prices which have increased +19.7% y/y, according to CoreLogic, get ready for a big jump in the industry’s conforming loan limit next month.

Industry Experts Predicting Conforming Loan Limit to Skyrocket in 2022

Some lenders, including PennyMacUnited Wholesale Mortgage UWM) and others, are already offering borrowers “conforming loans” of up to $625,000.  Such loans are obviously well above the current $548,250 baseline conforming loan limit for single-family homes in most markets.

Penny Mac is already offering the following expanded conforming loan limits with a caveat that a full appraisal is required:

  • One-unit properties – $625,000
  • Two-unit properties – $800,250
  • Three-unit properties – $967,250
  • Four-unit properties – $1,202,000

Kimberly Nichols, an executive with PennyMac, said, “With the recent run-up in home price appreciation affecting many markets throughout the country, we wanted to step in and provide support for borrowers.  This will specifically help those trying to purchase a home or access equity in their property while rates are relatively low.”

In high-cost markets, such as Alaska and Hawaii, lenders are already offering borrowers Freddie and Fannie $822,315 loans that are equal to 150% of the baseline conforming loan limit for single-family houses.  UWM has already announced that it will use $937,700 as its baseline conforming loan limit rather than the FHFA’s 2021 baseline of $822,315 in high-cost markets.

Industry experts are predicting a conforming loan limit for single-family houses to come in at $625,000 in November when the FHFA announces it, the same amount some lenders are already offering.

Such a prediction of $625,000 does not seem off base.  Already the FHFA’s HPI data for Q2 2021 indicates the index was up +12.83% compared with Q3 2020 in June 2021.  That increase of +12.83% all by itself would be enough to increase the baseline conforming loan limit to $618,570.  With July’s home price appreciation adding another +1.4% increase to that +12.83%, the baseline conforming loan limit would increase to $627,230 and the ceiling amount in high-cost markets to $940,845.

Thanks to Inman.

 

 

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