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Fannie Mae, Freddie Mac Will See Higher Lending Limits in 2018

The Federal Housing Finance Agency on Tuesday announced an increase in Fannie Mae and Freddie Mac lending limits, citing nationwide home-price gains — and perhaps signaling a similar change on the reverse mortgage side.

Starting in 2018, Fannie and Freddie will have maximum conforming loan limits of $453,100 for single-unit properties, up from $424,100 in 2017.

Under the Housing and Economic Recovery Act, or HERA, the FHFA must change its loan limits annually based on nationwide home price shifts; because the FHFA’s most recent House Price Index showed a gain of 6.8% between the third quarters of 2016 and 2017, the agency raised the conforming loan limit at the same rate.

For homes in certain high-cost areas — where prices where median home values exceed 115% of the baseline — FHFA provides a higher maximum figure, which in 2018 will be $679,650. That’s an increase from the previous total of $636,150.

Those high-value limits are generally reserved for a handful of jurisdictions in traditionally hot real estate markets, including counties in California’s Bay Area, New York City and its suburbs, and the metropolitan Washington, D.C. area. 

While the FHFA doesn’t have authority over Home Equity Reverse Mortgage lending limits, the Federal Housing Administration has historically moved in tandem with the Fannie and Freddie limits. For instance, last year, the FHFA pegged its high-cost limit at $636,150 on November 23. A week later, the FHA issued Mortgagee Letter 2016-19, which set the reverse mortgage limit at the same amount for 2017.

After a third-party actuarial report pegged the HECM’s economic value at negative $14.5 billion, Department of Housing and Urban Development officials demurred when asked about changes to limits, instead saying that they will continue to monitor the fund closely — especially since the lower principal limit factors instituted in October have yet to show tangible results.

“We are in a position now of needing to monitor how those changes are impacting the new endorsements coming in, and obviously, we’ll continue to monitor the portfolio closely,” HUD senior advisor Adolfo Marzol said earlier this month.

Written by Alex Spanko