More lenders leap over Fannie Freddie’s historic loan limits

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More mortgage lenders are leaping from what is expected to be a record increase in loan limits for Fannie Mae and Freddie Mac in 2022, offering “compliant loans” up to at least $ 625,000 before a official announcement next month.

Fannie and Freddie’s base conforming loan limit, which is indexed to a home price index maintained by their federal regulator, is currently $ 548,250 in most markets (see map below).

But late last month, PennyMac announced that it would underwrite and rate larger loans through its two wholesale and corresponding credit channels as if they were compliant loans, rather than “jumbo” mortgages that exceed Fannie and Freddie’s limits. Classifying higher balance loans as compliant makes them easier to qualify and allows many borrowers to lock in lower interest rates than they would be entitled to with a jumbo loan.

The two largest mortgage lenders in the country – Rocket Mortgage and United Wholesale Mortgages – have followed suit, increasing their conforming loan limits to $ 625,000. Others have jumped on an official announcement, including Caliber Home Loans, Homepoint, Wholesale fairway loan, America’s Finance, and Paramount Residential Mortgage Group Inc. (PRMG).

“We want to help alleviate some of the barriers to entry and the heavy burden that come with steadily rising home prices and continue to push the dream of owning a home even further beyond the reach of many home buyers. a first home, ”said Finance of America president Bill Dallas. in a declaration. “Increasing the maximum estimated loan amount on our compliant loans gives purchasing and refinancing borrowers greater access to mortgage credit at lower rates. “

“Jumbo loans are not feasible options for everyone, and higher compliant loan limits may help some borrowers who are trying to buy a home or access cash,” said the CEO of Caliber, Sanjiv Das, in a statement. Press release.

Although Rocket Mortgage has not posted a public notice online, a spokesperson confirmed to Inman that the company has raised the limit to $ 625,000 in its direct consumer and partner lending channels. A spokesperson for Homepoint said the company will increase the compliant loan limit to $ 625,000 effective October 13.

Equally important, the mortgage insurer National MI says he has also increased his limit for loans conforming to $ 625,000. This means that homebuyers who put less than 20% in funds – or homeowners who want to refinance mortgages with loan-to-value ratios above 80% – can benefit from many lenders’ decision to charge for balance loans. higher as compliant.

The rapid rise in house prices over the past year has made lenders confident that they will be able to sell larger loans to Fannie and Freddie after their federal regulator, the Federal Housing Finance Agency, announced the official 2022 compliant loan limit in November.

Under a formula mandated by Congress, the compliant loan limit is linked to the annual increases of the FHFA Seasonally adjusted and expanded housing price index. With a final quarter of home price appreciation to record, this index shows home prices rose 12.83% in the nine months ending June 30, which would be enough to bring the compliant limit to 618. $ 570.

The FHFA is expected to announce the 2022 compliant loan limit in November, when it releases extended HPI data for the third quarter. For the base conforming loan limit to be raised to $ 625,000, this index would need to show an annual home price appreciation of 13.99% over the 12 months ending September 30. That seems to be a sure thing, with an associated FHFA index showing 19.2% of annual homes price appreciation. until july.

While expanded data from the FHFA’s home price index are likely to show some deceleration in home price appreciation in August and September, lenders expect the loan limit to be in line with. 2022 is well over $ 625,000 – at which point they’ll embrace the even higher news. limits.

In gross dollar terms, that would be the biggest jump in the compliant loan limit in history, pushing it up to over $ 75,000. The largest percentage increase on record was the 15.9% increase observed in 2006.

Loan limits in line with baseline, 2000-2021

Historical compliant loan limits, 2000-21, with a projected limit for 2022. Many lenders have started offering compliant loans of up to $ 625,000 based on home price appreciation. Source: Federal Housing Finance Agency.

In some more expensive markets, Fannie and Freddie are currently permitted to purchase larger mortgages based on a multiple of the median home value, up to a cap equal to 150% of the base conforming loan limit, or $ 822,375 . The compliant loan limit for single family homes is $ 822,375 throughout Alaska and Hawaii.

2021 Compliant Loan Limits By County

Editor’s Note: This story has been updated to add Caliber Home Loans to the list of mortgage lenders who have announced higher temporary compliant loan limits.
Email Matt Carter


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