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The Federal Housing Finance Agency revealed that the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2021, will be increased from the current limit of $510,400 to $548,250.
"The Housing and Economic Recovery Act (HERA) requires that the baseline CLL be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price," according to the FHFA's press release.
"The FHFA published its third-quarter 2020 House Price Index report, which includes estimates for the increase in the average U.S. home value over the last four quarters. According to the seasonally adjusted, expanded-data FHFA HPI, house prices increased 7.42%, on average, between the third quarters of 2019 and 2020."
According to the report, areas where 115% of the local median home value exceeds the baseline CLL, the maximum loan limit will be higher than the baseline loan limit. Additionally, Alaska, Hawaii, Guam, and the U.S. Virgin Islands have special statutory provisions that establish different loan limit calculations. These areas will have a baseline loan limit of $822,375 for one-unit properties.
The California Association of Realtors has already commended the FHFA for making the increase in the CLL.
"C.A.R. commends the FHFA for recognizing California's record-setting home price increases during this past year and raising maximum conforming loan limits, which will give tens of thousands of California homebuyers a chance at homeownership," said C.A.R. president Dave Walsh, vice president and manager of the Compass San Jose office, according to a press release. "Increasing the existing Fannie Mae and Freddie Mac conforming loan limits will greatly benefit higher-priced areas of the state and provide stability and certainty to the housing market."