Nonbanks Raise Conforming Loan Limits Ahead of Schedule

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Several nonbanks have recently announced that they are raising their conforming single-family loan limits to $625,000 to help borrowers keep pace with rising home prices. The announcements are ahead of the Federal Housing Finance Agency, which typically announces conforming loan limits for the new year for Fannie Mae and Freddie Mac in November or early December.

Conforming loan limits are currently capped by the FHFA at $548,250 in most markets.

Rocket Co., Finance of America Mortgage, Homepoint, PennyMac, and United Wholesale Mortgage are among the lenders that have recently announced an increase to their conforming loan limits. The higher-balance loan programs represent an increase of more than $75,000 to the maximum loan limit for a conforming loan in many markets.

“We want to help ease some of the barriers to entry and the heavy burden that comes with rising home prices and continue to push the dream of homeownership out of reach for many first-time buyers,” Bill Dallas, Finance of America Mortgage president, said in a statement. “Increasing the estimated maximum loan amount on our tailored loans expands access to mortgage credit at lower rates to purchase and refinance borrowers.”

The swift increase in home prices has prompted lenders to take steps earlier than the FHFA’s 2022 announcement, they say.

“We view this as a retrospective step forward of the FHFA’s upcoming increase in the loan limit for 2022, which we expect will be more than that experienced in the previous year,” BTIG analyst Eric Hagen said in an Oct. 5 statement, according to The Anand Market. “The average nationwide home price will roughly reflect an appreciation of 15% to 20%. The idea is to gain some market share and drive earnings in the near term ... and eventually distribute loans to enterprises once the new limits take effect.” [Editor's note: This quote was originally misattributed to officials at PennyMac. We regret the error.]

Rising interest rates are expected to cut into lenders’ business over the coming months. Credit has been shrinking, and some housing analysts predict lenders may be jumping ahead on the conforming loan limit to try to capture more business.

“It is certainly a safe bet that the FHFA will raise the loan limit in November,” says Joel Kahn, associate vice president of economic and industry forecasting for the Mortgage Bankers Association. “It’s just how much goes up, and whether lenders have the liquidity to fund/hold those loans until they disburse them to the GSE.”