After leaving them in a holding pattern for 10 long
years the Federal Housing Finance Agency (FHFA) has raised conforming loan
limits for mortgages acquired by Fannie Mae and Freddie Mac. Separate loan limit announcements are
expected shortly from FHA and the Veterans Administration.
The current loan limit, $417,000, has been in place
since 2006. When the housing crisis hit,
the Housing and Economic Recovery
Act of 2008 (HERA) set the baseline loan limit at that existing level for one
to four family houses in most of the U.S. and required it be adjusted each year
to reflect any changes in the national average home price. When prices
continued to decline HERA also made clear that the baseline could not be
adjusted upward until the average U.S. home price returned to its pre-decline
here, FHFA reported on Wednesday that its third quarter House Price Index (HPI)
is now 1.7 percent higher than in the third quarter of 2007 and the agency has
raised conforming loan limits by 1.7 percent to $424,100. The new loan limits are
effective as of January 1, 2017.
designates as so-called high-cost areas, markets where 115 percent of the local
median home value exceeds the baseline loan limit. HERA sets the maximum loan limit as a
function of the area median home value with a ceiling on the limit of 150
percent of the baseline limit. Under
this formula, the new limit for the highest cost areas will have a ceiling of $636,150
in 2017. Other counties will have limits below that amount, but higher than the
new baseline. FHFA said as a result of generally rising home values, the
increase in baseline loan limit, and the rise in the ceiling loan limit, the
maximum loan limit rose in all but 87 counties (or county equivalents) in the
There are additional separate calculations for
Alaska, Hawaii, Guam, and the U.S. Virgin Islands for one-unit properties with additional
exceptions for some especially high cost specific locations.
A list of
the maximum conforming loan limits for all counties and county-equivalent areas
can be found at http://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx,
along with a link to a map showing loan
limits across the county.