Wednesday, November 30, 2022 / by Dave Magua
Fannie and Freddie get green light to buy $1M mortgages
Federal regulators gave mortgage giants Fannie Mae and Freddie Mac the green light to back mortgages of up to $726,200 in most parts of the country next year, and loans exceeding $1 million will be fair game in more than 100 higher-cost counties and Census areas where it’s hard to find homes for less.
The big run-up in home prices may have cooled for now, but the Federal Housing Finance Agency announced a 12 percent increase in Fannie and Freddie’s 2023 conforming loan limit Tuesday, based on home price gains through Sept. 30.
Under a formula mandated by Congress, the conforming loan limit is tied to annual increases in FHFA’s seasonally adjusted, expanded-data House Price Index. That index, also released Tuesday, showed home prices posted 12.4 percent annual gains during the third quarter.
“House prices were flat for the third quarter but continued to remain above levels from a year ago,” said FHFA economist William Doerner in a statement. “The rate of U.S. house price growth has substantially decelerated. This deceleration is widespread with about one-third of all states and metropolitan statistical areas registering annual growth below 10 percent.”
The $79,000 increase in the conforming loan limit will come as a relief to big lenders like Rocket Mortgage and United Wholesale Mortgage, which had already started pricing loans of up to $715,000 as conforming in September.
It’s also good news for many borrowers looking to take out loans that exceed the 2022 conforming loan limit, which is currently $647,200 in most parts of the country.
Because Fannie and Freddie can’t buy or guarantee “jumbo” mortgages that exceed that limit, jumbo mortgages tend to have stricter underwriting and higher down payment requirements, and some borrowers may also pay higher rates than they would for conforming loans.
While the new limits don’t take effect until Jan. 1, lenders can treat loans that exceed the current limit as conforming by holding them on their books for a few weeks until the increase becomes official.