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It’s Official — Loan Limits Remain the Same

by Peter G. Miller
November 27th, 2007

As reported in mid-October, FHA loan limits for 2008 will be the same as 2007 — $417,000 for a single-family home in high-cost areas in the lower 48 states.

In an official announcement, the Office of Federal Housing Enterprise Oversight (OFHEO) says it’s keeping the current loan limit even though property values nationwide dropped by more than $10,000. In other words, instead of adjusting the conforming loan limit to reflect what is actually happening in the marketplace, the government is trying to prop-up the housing sector with a little financial sleight-of-hand.

As explained here in October:

This is important to FHA borrowers for this reason: Under the current system the maximum FHA loan limit for high-cost areas in the lower 48 states is equal to 87 percent of the conventional loam limit. $417,000 x .87 = $362,790.

Also the FHA floor, the highest loan available in low cost areas, is equal to 48 percent of the conventional loan limit. $417,000 x .48 = $200,160.

Of course, if FHA modernization passes in Washington, then the FHA maximum is likely to be increased to the conventional loan limit.

The OFHEO release is below:

Washington, DC – Office of Federal Housing Enterprise Oversight Director James B. Lockhart today announced the maximum 2008 conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac (the Enterprises) will remain at the 2007 level of $417,000 for one-unit properties for most of the U.S. Higher limits apply to Alaska, Hawaii, Guam and the U.S. Virgin Islands as well as to properties with more than one unit.

The conforming loan limit determines the maximum size of a mortgage that an Enterprise can buy or guarantee. By law the maximum conforming loan limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey (MIRS) of the Federal Housing Finance Board (FHFB). The FHFB reported the decline in the average price was $10,685 or 3.49 percent, from $306,258 in October 2006 to $295,573 in October 2007. The combined two-year decline is now 3.65 percent.

“While the house price survey data used in determining the conforming loan limit show a decline over the past year, as previously announced and consistent with the proposed new conforming loan limit guidance, the level will remain at $417,000 for the third straight year,” said Lockhart.

On October 22, 2007 OFHEO published in the Federal Register a revised Examination Guidance proposal for procedures relating to the calculation of the conforming loan limit and implementation of increases or decreases in the limit. OFHEO published the initial proposal for comment on June 20, 2007. The second comment period has now closed and OFHEO is reviewing comments received. At the time of the October publication, OFHEO announced that no decreases in the loan limit would be required for 2008, regardless of the price data in the MIRS report.

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This entry was posted on Tuesday, November 27th, 2007 at 2:13 pm and is filed under , . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Responses to “It’s Official — Loan Limits Remain the Same”

  1. Jim Santangelo Says:

    How do I determine whether or not a loan I am working on is in a “high cost” area?

  2. Malcolm Says:

    Just ran into your blog. This appears like a very informative site and I esteem the work you put into it. I’m going to plan to visit your website commonly.

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