2009 Conforming Loan Limits Unchanged, FHFA Says

The conforming loan limit — the maximum size of loans that can be purchased by Fannie Mae (FNM: 1.04 -7.14%) and Freddie Mac (FRE: 1.23 -1.60%) — will remain at $417,000 during 2009, the Federal Housing Finance Agency announced Friday. Some designated high-cost areas, however, will continue to see specified higher limits equal to 115 percent of local median home prices (but cannot exceed 150 percent of the standard limit of $625,000 for single-unit homes).

The Housing and Economic Recovery Act of 2008 prohibits the conforming limit from declining year-to-year, meaning it was essentially a foregone conclusion FHFA would leave conforming limits untouched; the so-called “jumbo conforming” limits for high-cost areas are also spelled out by Congressional legislation.

Home prices have fallen in “virtually every” measure, FHFA said in a press statement, with many showing larger declines than the 5.9 percent purchase-only index decline and the 1.7 percent all-transactions index decline seen over roughly the past 12-month period.

While drama around the conforming loan limit has essentially been eliminated, FHFA officials did hint at an interesting change — that they may ditch the use of FHFHA price index data in calculating conforming limits going forward.

“FHFA has not yet determined whether it will continue to use a currently existing FHFA price index to gauge price movements in future years,” officials said in a media statement. “For this year, however, all reliable metrics point to lower prices, and a price decline of any size is sufficient to determine that the national limit will not change.” No further details were specified in the release.

The new limits for “high-cost” areas go into effect for loans purchased by the GSEs in 2009, except for loans made eligible for purchase under the Economic Stimulus Act, which sets generally higher limits on these exceptions. Under the Stimulus Act, loans originated from mid-2007 through 2008 are limited to 125 percent of local price medians and reach up to a $729,750 maximum. Despite the discrepancy between the limits under the act and the new “high-cost” area limits, FHFA said in a statement that the higher limits will be favored for loans originated in the timeframe defined by the Stimulus Act.

Loan limits for two-, three-, and four-unit properties will remain at 2008 levels, as well, FHFA announced: $533,850 for two-unit, $645,300 for three-unit and $801,950 for four-unit properties.

read the full statement.

Write to Diana Golobay at diana.golobay@housingwire.com.

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.