Despite a decrease in home prices, next year's conforming loan limit will not be adjusted downward.
The maximum single-family loan amount Fannie Mae and Freddie Mac will purchase in 2007 will remain at this year's level of $417,000, the Office of Federal Housing Enterprise Oversight announced today.
The conforming loan limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey of the Federal Housing Finance Board, which reported the average price declined to $306,258 from $306,759 over that period. The $501, or 0.16 percent, decrease is the first decline in the survey since 1992-93, according to the announcement.
On Nov. 15, OFHEO announced it would keep the 2006 limit if there was a decrease in house prices. This year's price decrease would be netted against any increase next year in determining the 2008 limits, but if another price drop followed, the limit would decline in 2008 by at least this year's percentage decrease in average prices. However, if the average October 2006 price exceeded that of October 2005, the limit would be adjusted upward by the percentage increase in price.
The 2007 maximum loan amount "is in keeping with OFHEO's recent announcement of an orderly and transparent process for any downward adjustment," said OFHEO Director James B. Lockhart in the written statement. "We made this decision so as not to disrupt the end-of-the-year pipeline of mortgages or the market for mortgage-backed securities."
Prior to this year's average price decrease, the increase in the survey over the previous five years was 8.8 percent, the regulator of the government-sponsored enterprise reported.
The loan limits for two-, three- and four-unit properties were also unchanged at $533,850, $645,300 and $801,950, OFHEO said in letters to Fannie and Freddie.
The second mortgage maximum remained at $208,500, according to the letters.
In high-cost areas of Alaska, Guam, Hawaii and the U.S. Virgin Islands, the limit for single-family first and second mortgages will be 50% higher, OFHEO added.
The unchanged limit will likely keep the maximum Federal Housing Administration insurable loan amount at $362,790 and the Veteran's Affairs insurable limit at $104,250.