Fannie & Freddie 2016 Loan Limits

There are 50 states in the U.S., and 3007 counties in those states. (The numbers of counties per state ranges from the 3 in Delaware to 254 in Texas; Louisiana and Alaska have parishes - functionally equivalent.) Out of the 3,007 counties, 39 of them had their conforming loan limits increased by the Federal Housing Finance Administration (FHFA) - the overseer of Freddie Mac and Fannie Mae and the 11 Federal Home Loan Banks. For the remaining 2,968 the FHFA announced that the $417,000 baseline conforming loan limit for the GSEs would remain unchanged in 2016. As a result, the high-cost ceiling will remain $625,500 for 2016.

The FHFA increased the loan limits for 39 counties between 1% and 8% due to slightly higher median home prices in those areas. Most of them were in California, Colorado, Tennessee, Massachusetts, or New Hampshire.

So in most of the country the loan limit will remain at $417,000 for one-unit properties. For those of you, mostly in urban areas where markets are still "on fire", hoping for a bump, remember the requirement that prior price declines be fully offset before a loan limit increase can occur. And prior price declines (remember 2006-2010?) haven't been fully recouped. The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels. The FHFA has determined that the average U.S. home value in the third quarter of this year remained below its level in the third quarter of 2007.

Fannie has updated rules for condos, co-ops and HomeReady mortgages. The Selling Guide has been revised to include changes to refund of loan-level price adjustments, co-op project review policy, project eligibility review service for established condo projects, updates to HomeReady and delivery of loans with more than two borrowers.

Fannie Mae is providing servicers advance notice that the requirement for evaluation on or before Dec. 1, 2015 for the Mortgage Release enhanced borrower incentive is being eliminated. The enhanced borrower incentive for Mortgage Release will continue beyond Dec. 1 for all jurisdictions identified in Announcement SVC-2014-21 and in Servicing Guide section D2-3.3-02, specifically, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, and the District of Columbia.

 

Effective with casefiles submitted to DU 9.3, PennyMac will be aligning with the changes announced by Fannie Mae in announcement SEL 2015-10 and DU Release Notes Version 9.3.  Loan casefiles created in DU Version 9.2 and resubmitted after the weekend of December 12 will continue to be underwritten through DU Version 9.2.

Are you ready for Fannie Mae's HomeReady affordable program? Arch MI's Down Payment Assistance Guidelines Program will support HomeReady in its entirety when the program is implemented in DU version 9.3 on December 12th, 2015.

 

Fannie Mae's HomeReady program, rolled out a few months ago, is turning some heads as it allows non-borrower income to count in qualifying homeowners for low-down payment loans. In other words it allows lenders to consider factors other than the immediate income of a loan applicant. Fannie also will consider rent from boarders on the property as a factor...will it expand credit to more borrowers and open the door to more innovation in evaluating a borrower's ability to repay? That's the plan, and we'll see what happens in December when DU can be used for the program.