After much speculation and fear mongering, the FHFA finally announced this morning that the conforming loan limit for mortgages acquired by Fannie Mae and Freddie Mac would stay put at $417,000 in 2014.
There was some panic the FHFA would lower the loan limits now that we’re mostly out of the woods housing crisis-wise, but interested parties like the National Association of Realtors fought tooth and nail to keep the existing limits in place.
The $417,000 loan limit applies to one-unit properties in the contiguous United States, sans the “freak states,” otherwise known as Alaska and Hawaii.
In those states, along with Guam and the U.S. Virgin Islands, the conforming loan limit is 50% higher and will remain at $625,500.
There Are Two Loan Limits In Effect
Since 2008, there are actually two sets of mortgage loan limits, including the “general” and “high-cost.”
The general, or traditional conforming loan limit, hasn’t changed since 2006, before rising about fourfold since 1980.
Yes, it stood at just $93,750 back in 1980, and was even as low as $252,700 in the year 2000 before rising like crazy along with home prices.
However, the high-cost loan limit has gone on a wild ride thanks to all types of housing crisis legislation, including the Economic Stimulus Act of 2008 and the Housing and Economic Recovery Act of 2008 (HERA).
The high-costs limits were as high as $729,750 from mid-2008 until late 2011, but have since fallen to a maximum of $625,500, which is 50% higher than the general conforming limit.
What About a Loan Limit Increase?
Well, HERA requires that prior home price declines be “fully offset” before an increase can take place.
Yes, home prices have skyrocketed over the past year and change, but they aren’t quite back to where they were.
So until national home prices rise back to pre-crisis levels and beyond, don’t expect an increase to the conforming loan limit.
For the record, many states in our great nation don’t even have a need for the high-cost limits. It’s only relevant in places like California, Colorado, Florida, DC, and parts of the Northeast.
In fact, most metropolitan areas have general conforming loan limits that are too high based on their median home price.
2014 High-Cost Loan Limits Higher in 18 Counties
But wait, there’s more. The high-cost loan limits actually increased in several counties nationwide, though the FHFA didn’t bother to tell us which ones.
However, we’re fortunate enough to have Holden Lewis of Bankrate do the dirty work for us.
The following metros saw increases either because home prices increased in the areas, or thanks to new metropolitan area boundaries established by the Office of Management and Budget (OMB).
In other words, some counties joined existing metropolitan or “micropolitan” areas where median home values were higher. And they use the highest-cost county median home value to set the entire area.
Here are the lucky winners:
Garfield, Colorado – $625,500 limit, up from $417,000
Kalawao, Hawaii – $657,800 limit, up from $626,750
Maui, Hawaii – $657,800 limit, up from $626,750
Camas, Idaho – $625,500 limit, up from $417,000
Lincoln, Idaho – $625,500 limit, up from $417,000
Essex, Massachusetts – $470,350 limit, up from $465,750
Middlesex, Massachusetts – $470,350 limit, up from $465,750
Norfolk, Massachusetts – $470,350 limit, up from $465,750
Plymouth, Massachusetts – $470,350 limit, up from $465,750
Suffolk, Massachusetts – $470,350 limit, up from $465,750
Rockingham, New Hampshire – $470,350 limit, up from $465,750
Strafford, New Hampshire – $470,350 limit, up from $465,750
Dutchess, New York – $625,500 limit, up from $417,000
Orange, New York – $625,500 limit, up from $417,000
Gates, North Carolina – $458,850 limit, up from $417,000
Buckingham, Virginia – $437,000 limit, up from $417,000
Culpepper, Virginia – $625,500 limit, up from $417,000
Rappahannock, Virginia – $625,500 limit, up from $417,000
By the way, the FHFA noted that the new boundaries resulted in lower loan limits in certain areas, though I don’t know which those are, or if it’s even important.