On November 23rd, the Federal Housing Finance Agency (FHFA) announced the increase of the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2017. This is the first baseline loan limit increase since 2006. The 2017 loan limit for one-unit properties will be $424,100 up from $417,000. How does this new loan limit impact your financial institution? The first lien thresholds established for Higher Priced Mortgage Loans (HPML’s) are based on this limit established by FHFA.
As a reminder, a HPML is a closed-end consumer credit transaction secured by the consumer’s principal dwelling if the annual percentage rate exceeds the average prime offer rate for a comparable transaction by:
- 1.5 or more percentage points for a first-lien with a principal obligation at consummation that doesn’t exceed the limit (≤ $424,100 for 2017);
- 2.5 or more percentage points for a first-lien with a principal obligation at consummation that exceeds the limit (> $424,100 for 2017); and
- 3.5 or more percentage points for loans secured by a subordinate lien.
In addition, the Federal Reserve Board and Consumer Financial Protection Bureau (CFPB) announced final rules detailing the calculation method used to adjust thresholds for exempting certain consumer credit transactions from Truth in Lending Act (TILA) and Consumer Leasing Act. The below thresholds are based on the CPI-W in effect on June 1, 2016 and no changes are being made to the following thresholds for 2017:
- Small loans exempt from the appraisal requirement for HPML’s – $25,500;
- Consumer credit transactions exempt from Truth in Lending/Regulation Z – $54,600 (loans secured by real property or personal property used or expected to be used the borrower’s principal dwelling and private education loans will continue to be covered);
- Consumer leases exempt from Consumer Leasing Act/Regulation M – $54,600.