WASHINGTON - Both Fannie Mae and Freddie Mac said they will maintain the same limits on all conforming loans, that is, the ones they will buy for the secondary market, despite the first drop in average home prices in 13 years.
The conforming loan limit on single family homes will remain at this year's level of $417,000 as a result. The average home price in October fell 0.16% to $306,258 from $306,759 a year earlier, the Office of Federal Housing Enterprise Oversight said.
The fall compares with an 8.8% average increase over the past five years. OFHEO, which regulates both Fannie and Freddie, said the impact of a home price decline in 2006 on the conforming limit would be deferred for one year.
The conforming loan limit was unchanged to help markets prepare for any downward adjustments. "We made this decision so as not to disrupt the end-of-the-year pipeline of mortgages or the market for mortgage-backed securities," said OFHEO Director James Lockhart. A drop in the conforming loan limit may slow production of loans for sale to the companies in a market that is already shrinking.
