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FHFA: Government to back mortgages up to $970,800 in 2022

Baseline conforming limit rises 18% to $647,200

The Federal Housing Finance Agency (FHFA) today announced the baseline conforming loan limit for 2022 will be $647,200, an increase of 18%.

The federal government will now back mortgage loans of nearly $1 million, with the new ceiling loan limit for one-unit properties in most high-cost areas now $970,800 — or 150% of $647,200.

Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $970,800 for one-unit properties.

In 2021, the FHFA set the baseline conforming loan limit at $548,250, a 7.5% increase from the prior year. Over the past six years, the baseline loan limit has risen $230,200.

Median home values exploded across dozens of housing markets across the country in 2021. In the third quarter, the FHFA announced that its house price index saw the largest increase since the metric was introduced in 2008. House prices increased 18.5% across the nation, while some markets saw even larger increases.

All large metropolitan areas tracked by the FHFA saw house-price increases. In Boise, Idaho, house prices jumped 35.8%, and the U.S. Census Bureau’s mountain division saw increases of 25% year-over-year.

In late September, several nonbank mortgage lenders announced that they would preemptively increase conforming loans limits to around $620,000 for most U.S. counties, a sign that the FHFA would be hiking loan limits significantly to keep up with the rise in prices.

A 2008 law determines the conforming loan limits for Fannie Mae and Freddie Mac.

The Housing and Economic Recovery Act established a formula for increases, and set the baseline loan limit at $417,000. It mandated that the baseline could only rise after home prices returned to pre-recession levels. That condition was finally met in 2016, when the FHFA increased conforming limits for the first time in a decade.

For high-cost areas, where 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit is higher than the baseline loan limit. HERA establishes the maximum loan limit in those areas as 150% of the baseline loan limit.

Some parts of the housing finance industry have questioned how the conforming loan limits are set.

The Housing Policy Council, which represents large mortgage lenders and servicers, wants the FHFA to use its authority as both regulator and conservator of Fannie Mae and Freddie Mac to freeze or drop the loan limits, notwithstanding the formula set by statute.

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