Only one county in the country–Fairfield, Conn.–will have a higher conforming loan limit in 2012. The ceiling in the other 3,200-plus counties will remain unchanged.
Under the permanent formula established by the Housing and Economic Recovery Act of 2008, the maximum size loan that can be purchased or securitized by Fannie Mae and Freddie Mac next year will remain at existing levels–$417,000 in most places but as high as $652,500 in high-cost counties. Only in Fairfield will the maximum increase, from $575,000 to $601,450 starting Jan. 1.
Other counties have higher home prices under the HERA formula, which tabulates loan limit changes based on average price increases or decreases from one October to the next in the nation’s 3,234 counties. But Fairfield was the one county that experienced an increase after other HERA requirements were taken into account.
Technically, the 2008 law requires that the baseline limit be adjusted each year to reflect changes in the national average home price, but prohibits declines in the limit. If average home prices decline, then the baseline limit is to remain the same. In setting HERA limits for the last three years, the Federal Housing Finance Agency found that the national average declined in each preceding year. As a result, the national ceiling was left unchanged.
This year, the monthly and quarterly house price index produced by FHFA showed further price declines. Consequently, the baseline and high-cost maximums will again be unchanged.
Unless the FHFA changes the formula–a step it says it is considering–it’s not likely that the conforming loan limit will change any time soon. The agency, which oversees the two secondary mortgage market institutions and the 12 Federal Home loan banks, has made the ‘policy decision” not to allow the maximum to decline. But HERA also does not allow for any increases in an area’s ceiling until past declines have been made up.
In announcing the 2012 limits, the FHFA said it is evaluating a number of alternative formulas for setting the ceiling and plans to publish for public comment a Federal Register notice in the coming months that will proffer a new ‘specific methodology” for measuring price changes in the future.
At the same time, the agency went out of its way to point out that no other reliable house price metric would produce different loan limits for 2012 than those it announced. Other indices “show price declines over the latest year and, importantly, indicate very large cumulative price declines since home prices peaked several years ago.” Cumulative declines are key because the law allows the baseline loan limit to increase only when home prices have returned to levels that prevailed before the declines.
“Home price statistics measured using any reliable methodology are far below” the current levels, FHFA said.
Daily Briefing | Wednesday, November 23, 2011
PMI Files for Chapter 11 Bankruptcy
The PMI Group Inc., Walnut Creek, Calif., has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.
30-Year Rate Slips Below 4% Again
The average weekly rate for a 30-year loan slipped slightly below 4% and rates for adjustable-rate mortgages averaged new record lows in Freddie Mac’s survey Wednesday.
Freddie Reports Higher Refis Delinquencies
Freddie Mac reported a 24% jump in refinancings from September to October while total loan volume rose by less than 4%.
Massachusetts Foreclosure Activity Reverses Yearlong Trend
After more than a year of declines, foreclosure activity rose in Massachusetts in October, according to the Boston-based real estate data publisher The Warren Group.
FHFA, GSEs: Dec. 1 UCDP Deadline Will Be Enforced
The government-sponsored enterprises’ Uniform Mortgage Data Program has been marred with delays and setbacks since the earliest steps began at Fannie Mae two-and-a-half years ago with the precursor to the Uniform Collateral Data Portal, the technology platform that will accept full electronic appraisal reports in a new XML-formatted data file.
Purchase Apps Up But Refinancings Sink
Application volume fell by 1.2% on a seasonally adjusted basis for the week ended Nov. 18, as purchase apps were up to their highest level since August, but refinancings were down to their lowest point since July, according to the Mortgage Bankers Association. The data for the previous week (Nov. 11) was adjusted to take into account Veterans Day.
Permits Up Again in California
For the third consecutive month, builders in California pulled an increasing number of permits compared to the previous year.
Lennar Adds to Debt Offer
Lennar Corp. has upsized its senior debt offering to $350 million and priced it at a 3.25% interest rate. It first proposed selling $300 million in debt. The over-allotment for the offering was also increased to $50 million from $45 million.