Nonbanks quick to implement 2022 conforming loan limits

Homepoint, Guaranteed Rate and UWM said that the new conforming loan limits were in effect as of Dec. 1


On Tuesday, the Federal Housing Finance Agency revealed the much-anticipated conforming loan limits for 2022, with the baseline number jumping by 18% to $647,200. It’s the largest-ever annual increase in the size of loans eligible to be bought by Fannie Mae and Freddie Mac.

The figure, which is determined by a formula set by Congress, didn’t catch many nonbanks too off-guard. Back in October, a handful of nonbanksPennyMac, Homepoint, United Wholesale Mortgage, and Rocket Mortgage — announced that they would all be upping their conforming loan limit to $625,000 for a one-unit property.

Though the FHFA’s announced limits are 3% higher than the number that nonbanks were apparently coalescing around, several nonbank lenders moved swiftly to implement the new limits.

On Wednesday, a day after the agency’s announcement, Homepoint, Guaranteed Rate and UWM all announced that the new limits were in effect.

A spokesperson from UWM noted that the wholesale lender is honoring the new higher-than-expected limits and that any UWM loans currently in the pipeline that are not locked can be adjusted based on the new loan limits.

Homepoint similarly stated that it would accept “conventional loan registrations and rate locks within the 2022 loan limits.”

Although the baseline was higher than many lenders expected, it follows a year of incredible home price growth.

According to the FHFA, single-family home prices in the third quarter jumped by 18.5% year-over-year across the nation. This marks the largest increase to the agency’s house price index, which tracks the average increase in home values, since the metric was introduced in 2008.

In high-cost areas, the FHFA increased the ceiling loan limit for one-unit properties to $970,800, up from $822,375 in 2021.

Meanwhile, for Alaska, Hawaii, Guam and the U.S. Virgin Islands, the baseline loan limit will also be $970,800 for one-unit properties.

The calculation used to determine the conforming loan limit is based on a formula established by the Housing and Economic Recovery Act (HERA), which in 2008 set the baseline loan limit to $417,000.

The regulation mandated that the baseline could rise only after home prices returned to pre-recession levels, which happened in 2016, resulting in the FHFA increasing the conforming loan limits for the first time in a decade.

For high-cost areas, defined as areas where 115% of the local median home value exceeds the baseline conforming loan limit, HERA dictates that the maximum loan limit is 150% of the baseline loan limit.

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