The conforming loan limit for one-unit dwellings in 2005 will be $359,650.Set for the first time by the Office of Federal Housing Oversight, the safety-and-soundness regulator of Fannie Mae and Freddie Mac, the new ceiling on mortgages that can be purchased or securitized by the government-sponsored enterprises takes into account the fact that the two secondary-market giants failed to make a $2,300 downward adjustment in average housing prices when calculating the 2004 ceiling. Had OFHEO not incorporated that adjustment in the '05 maximum, the limit would have been $362,000. Currently, the ceiling is $333,700. The limit is based on housing prices from one October to the next as determined by the Federal Housing Finance Board. The average for both new and existing homes in October was $264,540, up 8.53% from $243,756. But because of last year's procedural error, the increase in the limit for '05 will be only 7.8%. Nevertheless, Freddie Mac said some 340,000 borrowers will benefit next year from the somewhat lower rates charged by lenders on loans at or below the ceiling. Because of the higher conforming loan limit, the ceilings on federally backed mortgages will also increase next year, but it is unclear whether they will be based on the OFHEO-adjusted figure.

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