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Fannie Mae and Freddie Mac Announce Higher Conforming Loan Limits for 2005

In an annual rite of winter, Fannie Mae and Freddie Mac will be increasing their single-family mortgage loan limits from $333,700 currently to $359,650 on Jan. 1, the Office of Federal Housing Enterprise Oversight (OFHEO) announced last week.

The conforming loan limits are adjusted each year to reflect changes in average prices for new and existing homes from October to October on the Federal Housing Finance Board's (FHFB) home price index. While the index actually increased 8.53% over the 12-month period, OFHEO is increasing the limits by only 7.78% to account for technical changes to the FHFB index in 2003 that were not included in the calculation for this year's loan limit.

Fannie Mae and Freddie Mac estimate that the $25,950 increase in their loan limits will enable as many as an additional 271,524 and 340,000 home owners respectively to be eligible for a lower-cost conforming loan in 2005.

Also effective with the start of the new year:

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• Mortgages on two-family properties will rise from $427,150 to $460,400
• Mortgages on three-family properties will rise from $516,300 to $556,500
• Mortgages on four-family properties will rise from $641,650 to $691,600

The maximum amounts for mortgages in Alaska, Hawaii, Guam and the U.S. Virgin Islands are 50% higher than the limits for the rest of the country.

Fannie Mae says that most of the loans it purchases are well below the conforming limit; this year the average size of the single-family loans it is purchasing is about $160,000.

Based on the 2005 Freddie Mac loan limit, the FHA ceiling and floor for next year are expected to be approximately $312,895 and $172,632, respectively. Those levels will be officially announced by the Department of Housing and Urban Development at the end of this year.

For further information, e-mail Bill Renner at NAHB, or call him at 800-368-5242 x8597; or contact Michelle Hamecs, x8425 or Mike Carrier, x8529.
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