2012 GSE Loan Limits Virtually Unchanged, One Exception

by devteam November 23rd, 2011 | Share

The Federal Housing Finance Agencyrn(FHFA) has announced the conforming loans limits that will apply to the tworngovernment sponsored enterprises (GSEs) Fannie Mae and Freddie Mac in 2012.  The baseline limit will remain at $417000 forrnone unit properties in most of the country with certain higher limits forrndesignated “high value” counties based on median home prices.  The highest limit in those counties will bern$625,500, the limit that has been in effect since October 1 when higher limitsrntemporary established under the Housing and Economic Recovery Act (HERA) ofrn2008 expired.  The only county wherernlimits will change on January 1 is Fairfield County, Connecticut. </p

Under the temporary HERA provisions thernupper loan limit in high value areas prior to October 1 was $729,500.  On November 18 President Obama signed a lawrnreturning FHA loans to that that maximum and reinstating the even higher limitsrnthat had been in effect for VA loans. rnThe GSEs were specifically excluded from that legislation.  </p

In Fairfield County the maximum limitrnfor a single-family home will increase by $26,450 to $601,450 based on anrnincrease in the local median home value. rnWhile other counties also saw median price increases, this county wasrnthe only one that met other HERA terms to produce a higher loan limit.</p

HERA requires that the baselinernlimit be adjusted each year to reflect changes in the national average homernprice, but prohibits declines in the limit. If average home prices decline,rnthen the baseline loan limit remains the same. In setting HERA limits for 2009,rn2010, and 2011, FHFA found that the national average home price declined overrnpreceding years. As a result, the national loan limit was left unchanged. Thisrnyear, the monthly and quarterly house price index (HPI) series produced by FHFArnshow further national price declines and thus the baseline loan limit is againrnunchanged. </p

Going forward, FHFA is lookingrnat alternatives to this method and plans, in coming months, to publish a noticernin the Federal Register that will setrnforth a specific methodology for measuring price changes for loan limitrnadjustments.  FHFA noted that, had thisrnproposed metric been in effect this year, it would not have produced resultsrnfor 2012 any different than those announced today.

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About the Author


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

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