Wednesday, November 15, 2006

OFHEO: No Change to Conforming Loan Limit

by Bill McBride on 11/15/2006 03:53:00 PM

If housing prices fall, the 2007 conforming loan limit will not be changed. From OFHEO:

... a decline in price appears likely this year as the September number showed a 3.1 percent decrease. The FHFB’s October 2006 data will not be published until Nov. 28, 2006, but households and lenders are making decisions today that may be affected by the limits put in place next January.
...
If the October-to-October increase is negative, its effect on the maximum conforming limits will be deferred for one year. Thus, if the October 2006 average price is less than that of October 2005, the maximum 2007 loan limits will be unchanged from current levels. This year’s decrease would be netted against any increase next year in determining the 2008 limits. If a decrease in average price this year is followed by another decrease next year, the maximum loan limits will decline in 2008 by at least this year's percentage decrease in average prices.