On Private Lenders Raising the "Conforming Loan Limit"

The Official Announcement for 2022 will be in Late November

In August, I wrote: How Much will the Fannie & Freddie Conforming Loan Limit Increase for 2022? I noted that the FHFA, in late November, will raise the conforming loan limit (CLL) significantly for 2022.

The relevant index increased 16.4% in Q2 2021 from Q2 2020. We need the Q3 data, to be released in November, to determine the CLL increase for 2022, but it will probably be an increase of around 18% year-over-year.

Some private mortgage industry participants have already increased their “conforming loan limits” in anticipation of the FHFA raising the CLL. This is NOT an official increase. For example, a few days ago, Maria Volkova at Housing Wire wrote: PennyMac, UWM raise conforming loan limit ceiling

PennyMac announced this week that it is upping conforming loan limits by almost 14% through broker and correspondent channels. … Concurrently, United Wholesale Mortgage, announced this week that it is following suit and lifting its cap to $625,000.

PennyMac and United Wholesale Mortgage are private companies, and they are raising their limits in advance of the official FHFA announcement in November. These lenders will qualify buyers as if they are selling the loans to Fannie and Freddie, except for the loan limit. Then these lenders will hold any loans made prior to 2022 in their own portfolio until January.

Note that they are only raising the “limit” from $548,250 (low cost areas) to $625,000. That is a 14% increase, and the FHFA will probably increase the limit closer to 18% (like to around $645,000 or so). So these lenders are being conservative and will not be at risk.

On Maes and Macs

Some people might get confused by the official sounding use of “conforming loan limit” and a name like “PennyMac”. Here is a hilarious discussion from Doris “Tanta” Dungey (my former co-blogger) On Maes and Macs. An excerpt:

The ironies of history. Trivia buffs will know that once upon a time there were three "agencies": the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation. It didn't take all that long for market participants to start coming up with pronunciations for the abbreviations GNMA (Ginnie Mae), FNMA (Fannie Mae), and FHLMC (Freddie Mac, which makes no sense whatsoever except that nobody liked "Filly Mac." I once overheard an old hand in the loan delivery department helpfully explaining to a new recruit how to remember the difference between Mornet (FNMA) and Midanet (FHLMC), the GSEs' pool delivery software systems. "It's easy to remember," she said. "Midanet has a 'd' in it, just like 'FHLMC.'"). Old farts whose favorite childhood treat was a box of Pixies will remember the old-time candy company Fannie May, whose name is said to have inspired the whole thing, probably in the throes of a major sugar rush.

Anyway, the players long ago accepted the nicknames to the extent of actually legally changing their names to Ginnie Mae, Fannie Mae, and Freddie Mac, which was great for those of us who had to type Assignments of Mortgage. At some point the student loan corporation climbed on board and we got Sallie Mae, plus the agricultural loan guarantor known as Farmer Mac. By the mid-80s, if you were a government agency or GSE involved in the secondary loan market, you were almost always a Mae or a Mac of some kind. The Federal Home Loan Bank Board never did accept "Freddie Bob," which some of us thought was unsporting but there it is.

This started a fashion for private companies to put a Mae or Mac in their names, signifying that they were major players in the secondary loan market, too. Independence Mortgage Corporation named itself IndyMac. There was Ginger Mae for dicey home equity loans in the great subprime boom of the 90s. ResMae just declared bankruptcy last year, but Charlie Mac (which pools credit union loans) is still functioning as far as I know.

For more on Tanta, see: Doris "Tanta" Dungey and here is Compendium of Tanta's Posts.

The bottom line is the official Conforming Loan Limit will be raised by the FHFA in late November.