Fannie Mae-No Politics (FNMA)

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GSE Conforming Loan Limit Going Nowhere in 2016

By John Bancroft [e-mail]

The baseline $417,000 conforming loan limit is almost certain to remain unchanged in 2016, according to a new Inside Mortgage Finance analysis of key house-price trends.

The Federal Housing Finance Agency recently confirmed that it will use the seasonally-adjusted ?expanded data? house-price index as the yardstick for determining whether increases should be made to the $417,000 baseline, which has been in place for Fannie Mae and Freddie Mac business since 2006.

As of the second quarter of 2015, the most recent data available, the HPI reading was 205.37. That was still 9.98 points below the 215.35 measure back in the third quarter of 2007, when house prices started a near-continuous downward spiral over the next four years.

The 2008 Housing and Economic Recovery Act required that the baseline limit could not be lowered when house prices were falling. And when they began recovering, there could be no increase until the HPI reached its previous high, in this case in the third quarter of 2007.

The only way the baseline conforming loan limit would be raised for 2016 is if the HPI jumps nearly 10 points ? and even then it would be a nearly microscopic increase.