OFHEO Won't Reduce Loan Limit

If a key home price index declines, the Office of Federal Housing Enterprise Oversight says it will leave the $417,000 conforming loan limit unchanged in 2007 to avoid any possible pipeline disruption."If house prices fall, loan limits should reflect that, but we need to ensure an orderly and transparent process for any downward adjustment," OFHEO Director James Lockhart said. OFHEO will set the Fannie Mae and Freddie Mac conforming loan limit after the Federal Housing Finance Board releases its October home price index on Nov. 28. If the October 2005 to October 2006 index shows an increase in house prices, OFHEO will increase the conforming loan limit. If the index shows a decline in home prices, "this year's decrease would be netted against any increase next year in determining the 2008 limits," OFHEO said. Fannie and Freddie cannot purchase loans with a principal amount above the conforming loan limit.