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Loan Limits Unchanged in Most of U.S.

by devteam November 25th, 2014 | Share

The maximum conforming loan limit willrnremain at $417,000 for most of the U.S. in 2015.  FHFA announced the limits, which define thernsize of loans eligible to be acquired by Fannie Mae or Freddie Mac, on Monday.  The limits are established under the terms ofrnthe Housing and Economic Recovery Act of 2008 (HERA) and recalculated eachrnyear.</p

The limits were unchanged despiternsubstantial increases in most indexes that measure home prices on national andrnlocal levels.  FHFA explained that HERArnrequires that while the baseline loan limit be adjusted each year to reflectrnchanges in the national average home price, after a period of declining pricesrnany prior declines must be fully offset before a loan limit increase canrnoccur.  </p

During the financial crisis the FHFA homernprice index declined by close to 20 percent through 2011.  Increases since then have not been sufficientrnto offset those loses.  FHFA said thatrnwhile its own index has been used for the calculation, the results would havernbeen the same if several other commonly cited indexes had instead beenrnemployed.   </p

The $417,500 baseline limit is notrnuniversal however.  Where 115 percent ofrnthe median home value in a given area exceeds that limit higher loans arernpermitted although a local limit cannot be more than 50 percent above thatrnbaseline.  The highest possible localrnarea loan limit for a single family property is $625,500 – 150 percent of thernbaseline.  Additional exceptions existrnfor Alaska, Hawaii, and the District of Columbia.</p

FHFA announced that local loan limits arernbeing raised in 46 counties (full list) although in actuality only a few metropolitanrnstatistical areas (SMSAs) are affected and most of the increases will be small.  The largest increase will be in the sevenrncounties in eastern Massachusetts and Southern New Hampshire that comprise thernBoston-Cambridge-Newton-NH SMSA.  Theserncounties will see an increase of $47,150 to a new limit of $517,500.  Seven counties comprising the -Baltimore-Columbia-Towson,rnMaryland SMSA also got a new limit of $517,500 although for that area this wasrnan increase of only $23,000.</p

Fourteen counties making up the NashvillernTennessee metropolis will be boosted from the national baseline limit to $425,500rnand the three counties in the Seattle-Tacoma-Bellevue area will go fromrn$506,000 to $517,500.  Four widely dispersedrncounties in California will get increases as well, Monterey (+$9,550) Naparn(+$23,000), San Diego (+$16,100), and Ventura (+$5,750).</p

Ten counties in the Denver-Aurora-LakewoodrnSMSA will be boosted off of the baseline to $424,350, but an 11th Coloradorncounty, Boulder, will increase by $39,550 to $456,550.</p

FHFArnsaid that although other counties experienced home value increases inrn2014, after other elements of the HERA formula were accounted for thernlocal-area limits were left unchanged.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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