GSEs Hike Loan Limits 3.4%

After apparently agonizing over a rather paltry 3.4% increase in the conforming loan limit, Fannie Mae and Freddie Mac have raised their ceiling for single-family mortgage purchases to $333,700 for next year.The comparatively small, $11,000 increase is less than half the 7.33% hike put into effect at the beginning of 2003, when the limit was raised to $322,700. And it is only about a third of the 9.36% jump put into effect in 2002. The two government-sponsored enterprises had trouble with a change instituted in January in how the Federal Housing Finance Board determines the index on which the loan limits are based. But in the end, they decided to accept the board's determination that the average price of both new and existing houses increased only 3.4% between October 2002 and October 2003. Still, the higher ceiling on loans the GSEs can purchase for their own portfolios or bundle into securities for sale to investors will help upwards of 150,000 homebuyers save $38,700 over the life of a 30-year loan, according to Freddie Mac's estimates. The higher loan limit will also result in an increase in the Federal Housing Administration ceiling next year to roughly $290,733 in about three dozen high-cost markets and $160,200 nearly everywhere else.