By Jacob Passy
Fannie Mae and Freddie Mac will soon provide guarantees for mortgages close to $1 million, owing to the past year’s titanic increase in home prices.
On Tuesday, the Federal Housing Finance Agency released its breakdown of the conforming loan limits for 2022. These are the maximum allowable mortgages that can be backed by Fannie Mae /zigman2/quotes/208846331/delayed FNMA -2.02% and Freddie Mac /zigman2/quotes/202741363/delayed FMCC -1.48% — larger home loans would be considered jumbo loans, which are typically portfolio loans or securitized privately.
Throughout most of the country, the 2022 baseline limit on loans for single-family homes backed by Fannie and Freddie will be $647,200, which represents an increase of nearly $100,000 from 2021. The new limits officially go into effect on Jan. 1.
The FHFA based the increase on data gleaned from its House Price Index, which showed an 18.05% increase on average in home prices nationwide between the third quarters of 2020 and 2021.
In high-cost housing markets, Fannie and Freddie are allowed to support mortgages of greater amounts. By law, the limit for high-cost areas is set at 150% of the baseline limit, meaning that in some markets the mortgage giants could back loans up to $970,800 in value.
Conforming loan limits vary from county to county. According to the FHFA, there were only four counties nationwide where the loan limits did not increase — a reflection of how widespread home-price appreciation has been over the past year. By law, the loan limits set by the FHFA cannot be reduced, even in cases where home prices drop.
New data has suggested that home-price growth has begun to slow. September was the first month since May 2020 in which annual home-price growth decreased, according to the latest edition of the S&P CoreLogic Case-Shiller Home Price Index. And data from Realtor.com showed that listing prices have fallen on a yearly basis in 17 of the 50 largest metro areas nationwide, a reflection of the fact that more homeowners are finally putting their homes up for sale.