Changes Coming in 2018 Conforming Loan Limits .. What, Where, How, and Why?

Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI


Changes Coming in 2018 Conforming Loan Limits 

What, Where, How, and Why?


If you read the news or follow announcements made in regards to credit and finance, you may have seen the recent announcement (11/28/2017) by the Federal Housing Finance Agency (FHFA) addressing maximum conforming loan limits on one-unit properties ...


The Federal Housing Finance Agency (FHFA) was created in July of 2008 as part of the Housing and Economic Recovery Act of 2008 in response to the housing collapse taking place.  Its mission is to provide oversight to the Government Sponsored Enterprises (GSE)  Fannie Mae, Freddie Mac, and Banks.
Two separate categories of Loan Limits are established by the FHFA.    The two (2) categories of loan limit are "General" and "High-Cost", referring to Geographical areas of the country.  
These Loan Limits were established as a protection for the GSE Agencies          (Fannie Mae and Freddie Mac) in the event of a future Foreclosures.  Each category of Loan Limit is seasonally adjusted to reflect changes taking place in the Nation's home price average.
In particular, the "High Cost" category was established to allow higher loan amountsabove the General Loan Limit, so as to not choke off ongoing recovery in higher-cost housing markets such as Washington DC, Alaska, Hawaii, and more.


But you probably want to know: 
  • WHO decides when the Loan Limit should be increased?
  • HOW is the Limit determined?
The Housing and Economic Recovery Act (HERA) requires that:
     #1:  The baseline loan limit is reviewed each year to reflect the changes in the national average home price.  HERA specifies that the Federal Housing Finance Agency  (FHFA) "establish and maintain" an index for tracking average home prices for this purpose.  In May 2015, FHFA published a Notice and Request for Input announcing its plans for using the seasonally adjusted, expanded-data HPI (House Price Index) for this purpose.
     #2.  In determining 2018 maximum loan limits under the terms of HERA, FHFA used the seasonally adjusted expanded-data HPI.  The relevant calculation was the proportional change between the 2016Q3 and 2017Q3 index values.  The increase in the index over that interval was:
(232.49844929 - 217.60366233)/217.60366233
The increase for 2018 was based upon the change in data for home prices documented in the 3rd Quarter of 2016 and the 3rd Quarter of 2017.  That increase was 6.845% +/-.
As a result, the Maximum Conforming Loan Limit will increase from $424,100 to $453,100.
This change will allow homebuyers to finance a home in 2018 up to $453,100 in "General Areas" and still maintain a Conforming Loan status, obtain the best rates offered (and available) to them, and not be classified as a JUMBO Loan Type where qualification becomes a bit more stringent.
So, all the above info and background lead to this announcement from the FHFA on November 28th, 2017:
"The Federal Housing Finance Agency (FHFA) announced 11/18/2017, the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac.  In most of the U.S., the 2018 maximum conforming limit for one-unit properties will be $453,100, an increase from $424,100 in 2017".  
It makes sense that if statistics and data from the HPI (Home Price Index) support it, that the Loan Limits should be increased.  Home Prices have been on the rise, at least on average, and as the Index bears out ...
* Hoping to Buy or Refinance a home in New Lenox or elsewhere in Chicagoland?  Contact me! I'll put my 40+ years of mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt
Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed
American Portfolio Mortgage Corp.
NMLS #175656
Direct: 815.524.2280
Cell/Text: 708.921.6331
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

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Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy


You always do such a great job of explaining the changes in the Mortgage world, so that we all can understand it better.  Thank you for that.  A

Dec 05, 2017 12:09 PM #1
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good afternoon Gene -I am glad you are keeping us up to date on this.  A borrower needs to know that when they see you they are seeing a knowledgeable trusted adviser.

Dec 05, 2017 12:24 PM #2
Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Great information Gene  thanks for keeping us up to date

Dec 05, 2017 12:38 PM #3
Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

This is important information, that is valuable for us to all know, Gene!

Dec 05, 2017 04:13 PM #4
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene that was a health jump in the limits.  The increase in the conforming limits will be helpful as home price start to go up.

Dec 06, 2017 12:15 PM #5
Jane Peters
Home Jane Realty - Los Angeles, CA
Connecting you to the L.A. real estate market

Yet another great informational post re all things mortgage. And you know where this will be going.....

Dec 07, 2017 02:17 PM #6
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

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