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The Federal Housing Finance Agency (FHFA) has announced that the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2016 will remain at existing levels, except in 39 high-cost counties where they will increase. In most of the country, the loan limit will remain at $417,000 for one-unit properties.
The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels. The $417,000 loan limit will stay the same for 2016 because FHFA has determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007.
HERA provides for higher loan limits in high-cost counties by setting loan limits as a function of area median home value. Although the baseline loan limit will be unchanged in most of the country, 39 specific high-cost counties in which home values increased over the last year will see the maximum conforming loan limit for 2016 adjusted upward. Although other counties also experienced home value increases in 2015, after other elements of the HERA formula—such as the statutory ceiling and floor on limits—were accounted for, these local-area limits were left unchanged.
“Access to credit is a critical factor for potential homebuyers, especially in many high-cost areas, and the Federal Housing Finance Agency’s announcement today addresses those concerns in a number of markets,” said National Association of Realtors (NAR) President Tom Salomone. “We will continue working with FHFA to recognize the challenge of rising prices in high-cost areas so we can ensure that families everywhere have the tools they need to achieve the dream of homeownership.”