The Office of Federal Housing Enterprise Oversight (OFHEO) has announced that the maximum 2006 conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac will jump nearly 16 percent to $417,000. The nearly $60,000 increase from 2005's limit of $359,650 is one of the largest on record and will allow as many as half a million more borrowers to lock into rates that are 25-50 basis points lower than those offered in the jumbo sector. The increase in conforming loan limits is based on the October to October changes in the average home sales price, as published by the Federal Housing Oversight Board (FHFB), and on supervisory guidance issued by OFHEO. The FHFB's figures are derived from its monthly survey of lenders, a survey including both new and existing home sales.
The 2006 conforming loan limits are as follows:
The increases will affect two reverse mortgage products: the federally insured Home Equity Conversion Mortgage (HECM), which accounts for 90 percent of all reverse mortgages made in the U.S., and the Fannie Mae Home Keeper loan.
The loan limits for the HECM product vary by geographic area. The highest of the loan limits will grow from $312,896 to $362,790. The lowest loan limit, which generally applies to rural and non-metropolitan areas, will grow from $172,632 to $200,160.
"These increases in the loan limits for the HECM and Home Keeper products will enable seniors to access greater amounts of equity in their homes, providing a powerful tool for addressing their financial needs through retirement," said Peter Bell, president of the National Reverse Mortgage Lending Association.
Approximately 79.8 percent of the 3,226 counties (2,575) in the U.S. are currently at the lowest HECM loan limit ($172,632). Only 104 counties, or 3.2 percent of the total, are at the current maximum loan limit of $312,896. The balance is somewhere in between. While counties at the "floor" are guaranteed to rise from $172,632 to $200,160, there is no guaranty that counties at the current "ceiling," or in between the floor and ceiling, will rise immediately.
The ceiling on loans insured by the FHA will also increase in 2006 to $362,790 in approximately three-dozen high-cost markets. The FHA maximum loan amount in most other places will be about $200,160. FHA loan limits for individual counties may vary between the base and the high-cost, depending on the median housing price for that county or MSA.
In addition, the maximum no-down-payment loan that will be guaranteed by the Department of Veterans Affairs will be $417,000 in 2006. Eligible veterans can still purchase higher-priced houses, but because the VA guaranty is accepted by some lenders as a substitute for a 25 percent down payment, buyers will have to put up $1 of their own money for every $4 they want to borrow above the limit.
The 2006 FHA loan limits are indexed on the 2006 conforming loan limits, with the base and high-cost limits expected as follows:
Single-family $200,100 $362,790
Two-family $256,248 $464,449
Three-family $309,744 $561,411
Four-family $384,936 $697,696