$417,000 Is Still The Maximum Conforming Limit

$417,000 Is Still The Maximum Conforming Limit

Despite a two year decline of 3.65% in home prices, the conforming loan limit for mortgages purchased by Fannie Mae and Freddie Mac next year will remain at the 2007 level of $417,000, according to the Office of Federal Housing Enterprise Oversight.

Only twice since 1980 has the average price of houses sold between one October and the next fallen, and both times, in 1994 and 1995, Fannie and Freddie elected to keep the ceiling on loans they can buy or guarantee at the then current level.

In 2004, OFHEO, the safety and soundness regulator of the two government sponsored enterprises, took over responsibility for adjusting the limit. And in October, the agency offered a revised proposal for calculating and implementing decreases as well as increases, and said the limit would not be lowered for 2008, regardless of pricing data, to avoid disruption in the mortgage market and “assure an orderly and transparent process for any downward adjustment”.

OFHEO is reviewing comments on its proposal. According to the monthly price survey by the Federal Housing Finance Board, the average price in October was $10,685, or 3.49%, lower than in October 2006. Between October 2005 and October 2006, the average dipped $501, or 0.16%, for a combined decline of 3.65%.

Under OFHEO’s proposal, if prices next year decline or rise by less than 0.65%, the limit for 2009 would decline by 3.65%, to $401,780.

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