Ann Arbor, Michigan-based mortgage lender Homepoint has raised conforming loan limits ahead of the Federal Housing Finance Agency’s (FHFA) decision expected to November. The decision follows that of competitors Rocket Mortgage, United Wholesale Mortgage, Pennymac and Finance of America.
The company on Wednesday accepted a $715,000 conventional conforming limit for one-unit properties, up 10.5% from the current $647,200 level. The cap increases to $916,000 for two units, $1,107,000 for three units and $1,376,000 for four units.
In Alaska and Hawaii, high-cost areas, the company’s limit increased to $1,072,500 for one-unit properties, compared to the current ceiling of $970,800. The expansion will remain in effect until the 2023 FHFA conforming loan limits are implemented in December.
These loans today would classify as jumbos. They are too large to be purchased by Fannie Mae and Freddie Mac, require higher down payments and the borrower needs additional documentation to apply.
When a lender raises the cap ahead of the FHFA decision, it has potential to attract more homebuyers with improved loan conditions, which could unlock business in a shrinking origination landscape.
“With homebuying demand down significantly, every loan possibility is incredibly valuable for loan originators,” Phil Shoemaker, president of originations at Homepoint, said in a statement. “We’re making sure that our loan originator partners are best equipped to maximize every customer touchpoint they have, whether it’s today, next week or months from now.”
Lenders started to raise the limit in early September, with Rocket Pro TPO and United Wholesale Mortgage as the first movers. They were followed by Pennymac and Finance of America.
It was always expected that lenders would increase loan limits ahead of the FHFA’s November announcement, though lenders’ move happened earlier this year. In 2021, when rates were still in the low 3% range, they didn’t raise anticipated conventional loan limits until early October.
The Housing and Economic Recovery Act established in 2008 determined a formula for increasing conforming loan limits for Fannie Mae and Freddie Mac. The law mandated that the baseline could only rise after home prices returned to pre-recession levels.
That condition was met eight years later in 2016 when the FHFA increased conforming limits for the first time in a decade.