The Federal Housing Finance Agency has announced it is raising the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2021 to $548,250 on one-unit properties, an increase from $510,400 in 2020. The increase is effective in January 2021.
The conforming limit for high cost areas like San Mateo and Santa Clara counties and most counties in the Bay Area will increase to $822,375, from $765,600 in 2020. This increase is 150 percent of $548,250.
This is the fifth consecutive year that the FHFA has increased the conforming loan limits after not increasing them for a decade from 2006 to 2016. In 2016, the FHFA increased the Fannie and Freddie conforming loan limit for the first time in 10 years. As a result of rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum CLL will be higher in 2021 in all but 18 counties or county equivalents in the U.S.
The Silicon Valley Association of Realtors joined the national, state and other local Realtor associations in applauding the recent FHFA's decision. "San Mateo and Santa Clara counties have high median home prices way above the national median home price," said Mary Kay Groth, president of the Silicon Valley Association of Realtors and a Realtor with Sereno Group Los Gatos. "Raising the conforming loan limits will greatly help homebuyers in Silicon Valley who are already being challenged by rising home prices. Realtors have long advocated for making higher conforming loan limits permanent for the impacted counties."
The FHFA conforming loan limits define the maximum mortgage amounts that Fannie Mae and Freddie Mac may finance or "guarantee." The limits are important for funding home sales, especially in high cost markets like California, where median home values have generally greatly increased. Non-conforming or "jumbo loans" typically have tighter underwriting standards and sometimes carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.
The Housing and Economic Recovery Act (HERA) requires that the baseline CLL be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price. According to the seasonally adjusted FHFA House Price Index, house prices increased 7.42 percent, on average, between the third quarters of 2019 and 2020. Therefore, the baseline maximum CLL it in 2021 will increase by the same percentage.
"C.A.R. commends the FHFA for recognizing California's record-setting home price increases during this past year and raising maximum conforming loan limits, which will give tens of thousands of California homebuyers a chance at homeownership," said C.A.R. President Dave Walsh, vice president and manager of the Compass San Jose office. "Increasing the existing Fannie Mae and Freddie Mac conforming loan limits will greatly benefit higher-priced areas of the state and provide stability and certainty to the housing market."
To view the new limit in each county, visit https://www.fhfa.gov/.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
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