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Some Nonbanks Raised Conforming Loan Limits to $625K

Loan limits will likely go up to $625K in 2022, but FHFA hasn’t announced it yet. Still, higher home values have convinced some lenders to boost loan limits now.

WASHINGTON – Several nonbanks are raising their conforming single-family loan limits to $625,000 to help borrowers keep pace with rising home prices. The announcements jumpstart the Federal Housing Finance Agency (FHF), which typically announces conforming loan limit increases for the upcoming year in November or early December.

The loan limits define the upper range for conforming loans acceptable to Fannie Mae and Freddie Mac. Conforming loan limits are currently capped by the FHFA at $548,250 in most markets.

Rocket Co., Finance of America Mortgage, Homepoint, PennyMac and United Wholesale Mortgage are among the lenders that recently announced an increase to their conforming loan limits. The higher-balance loan programs represent an increase of more than $75,000 to the maximum loan limit for a conforming loan in many markets.

“We want to help ease some of the barriers to entry and the heavy burden that comes with rising home prices, and continue to push the dream of homeownership out of reach for many first-time buyers,” Bill Dallas, Finance of America Mortgage president, said in a statement. “Increasing the estimated maximum loan amount on our tailored loans expands access to mortgage credit at lower rates to purchase and refinance borrowers.”

The swift increase in home prices has prompted lenders to take steps earlier than the FHFA’s 2022 announcement, they say.

“We view this as a retrospective step forward of the FHFA’s upcoming increase in the loan limit for 2022, which we expect will be more than that experienced in the previous year,” PennyMac officials said in a statement. “The average nationwide home price will roughly reflect an appreciation of 15% to 20%. The idea is to gain some market share and drive earnings in the near term … and eventually distribute loans to (Fannie Mae and Freddie Mac after) the new limits take effect.”

Lenders expect rising interest rates to cut into their business over the coming months. Credit has been shrinking, and some housing analysts say that lenders may be jumping ahead on the conforming loan limit to try to capture more business.

“It is certainly a safe bet that the FHFA will raise the loan limit in November,” says Joel Kahn, associate vice president of economic and industry forecasting for the Mortgage Bankers Association. “It’s just how much goes up, and whether lenders have the liquidity to fund/hold those loans until they disburse them to the GSE.”

Source: “Rocket, Homepoint, FOA Raise Fannie, Freddie Conforming Loan Limits,” The Anand Market (Oct. 12, 2021); Finance of America Mortgage; and PennyMac

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