Although the chances are slim, the conforming loan limit in a few high-cost housing markets could rise on Jan. 1.
Even if the effort by some lawmakers to push the GSE loan limit back up to $729,750 eventually fails, the ceiling still could rise in the few places nationally that have experienced rising values, according to Andrew Leventis, principal economist at the Federal Housing Finance Agency (FHFA).
“The odds are that only a handful of markets could see a small increase,” Leventis told ASR sister publication National Mortgage News. “But most likely any increases would be very small and very limited.”
Under the Housing and Economic Recovery Act of 2008, FHFA is charged with adjusting the conforming loan limit annually to 115% of median for a particular area.
But the agency, which oversees Fannie Mae and Freddie Mac, has made the “policy decision” not to allow the maximum to decline. Also, the law does not allow for any increases in an area's ceiling until past declines have been made up.
Consequently, Leventis said that while some increases are possible within those constraints, they “most likely will not be dramatic.”
The current baseline ceiling is $417,000. But the limit is higher in some markets: up to a maximum of $625,500, the same maximum as in 2008.
FHFA announces changes to the GSE loan limits in November, typically just before the Thanksgiving holiday, and that's likely to be the time-frame this year as well, according to the economist. “It could be quite a trivial announcement,” he said.
Changes in the limits are based on the average price of both new and existing houses sold from one October to the next. In September, the average fell in 20 of the 32 markets surveyed each month by the FHFA.
Meanwhile, on Capital Hill, the move to hike the maximum in high-cost markets back to the level it was prior to Oct. 1 seems to have stalled in the House, where 136 of the lower chamber's 435 members – but only 25 Republicans – have signed on to co-sponsor legislation to reinstate the higher limit.
The Senate has already voted to extend the $729,750 maximum for two more years for FHA and GSE loans as part of a Department of Housing and Urban Development appropriations bill.