US raises federal-supported home mortgage limit to nearly $ 1 million

The highest value of U.S. mortgages eligible for federal government support has been increased to nearly $ 1 million, reflecting the rise in house prices during the coronavirus pandemic.

The federal housing finance agency said the largest loan for a single family home in on Tuesday High cost areas including New York and Los Angeles, which can be bought by state-sponsored home loan agencies Fannie Mae and Freddie Mac, will rise to $ 970,800 in 2022.

This is an 18 percent increase in what is known as the compliant credit limit set in 2021. Most of the United States will raise the limit from $ 548,250 to $ 647,200.

The hikes will beg the question of whether Fannie and Freddie, who were taken over by the federal government during the subprime mortgage crisis, helped fuel a sharp spike in home prices.

The FHFA data, also released on Tuesday, showed that house prices rose 18.5 percent year over year in the third quarter of 2021 highest historical level in its quarterly series.

“Compared to previous years, the compliant credit limits for 2022 represent a significant increase due to the historic appreciation of house prices over the past year,” said Sandra Thompson, executive director of the FHFA, in a statement.

The Housing and Recovery Law of 2008 requires that the underlying credit limit be adjusted each year to reflect changes in national home prices.

According to Walt Schmidt, Head of Mortgage Strategy at FHN Financial, the policy is “a bit self-fulfilling” as higher home prices push the limit upwards, which further supports rising prices.

“This increase in loan volume extends creditworthiness for borrowers in the new, expanded loan category that a FICO may have marginalized [credit] Score, ”said Schmidt.

Fannie and Freddie guarantee a large chunk of the mortgages and have been under government supervision since 2008 when they were bailed out during the property market crash.

The Trump administration had proposed reprivatizing Fannie and Freddie, but efforts ultimately failed.

The pandemic has increased the demand for larger suburban homes. US house prices rose slightly Slower in September, according to S&P CoreLogic Case-Shiller index data released Tuesday.

William Doerner, FHFA’s supervisory economist in the research and statistics department, said that while market momentum had increased “exceptionally quickly”, market momentum “peaked in July as growth slowed compared to the previous month” .