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The nation’s biggest mortgage lender, United Wholesale Mortgage, is matching moves by rivals Rocket and Pennymac and raising its baseline conforming loan limit for single-family properties to $802,650 starting Wednesday, Sept. 18.
Chicago-based Rate says it will do the same for borrowers locking rates on or after Sept. 24, joining the movement to help some homebuyers avoid what can be more stringent underwriting and higher rates for jumbo loans when purchasing homes above the current conforming loan limit of $766,650.
“Rate is dedicated to giving our customers the very best home financing options in the market and we’re excited to open up higher conforming loan limits early to them,” Rate executive Jeremy Collett said in a statement to Inman.
Jumbo mortgages that exceed the conforming loan limit are off limits for purchase and guarantee by mortgage giants Fannie Mae and Freddie Mac. The limit is adjusted annually when home prices rise, but the official announcement — by Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA) — isn’t expected until November.
When annual home price appreciation soared into the double-digits during the pandemic, lenders got into the habit of raising their limits before an official FHFA announcement, giving homebuyers a break by pricing some jumbo loans as if they were conforming.
Lenders can hold jumbo loans that they priced as conforming until Jan. 1, and then sell any loans that are under the official 2025 conforming loan limit to Fannie and Freddie.
Baseline conforming loan limit, 2000-2024
Source: Federal Housing Finance Agency.
Last year Rocket, UWM and Rate all started treating loans of up to $750,000 as if they were conforming in October when the official limit was still $726,200. That proved to be a safe bet, as the conforming loan limit was bumped up by $39,350 on Jan. 1 — a 5.4 percent increase.
It was the smallest increase in years, with the baseline conforming loan limit for single-family homes shooting up by a record 18 percent in 2022 and by another 12.4 percent in 2023.
According to the latest numbers from FHFA, U.S. home prices rose 5.7 percent during the year ending June 30. But FHFA will look at appreciation for the year ending Sept. 30 when setting the 2025 conforming loan limit.
Lenders look to be playing it safe again in getting a jump on FHFA, factoring in assumptions that price appreciation is cooling. Fannie Mae forecasters predict home price appreciation will slow to an annual rate of 3.7 percent during Q3 2024 and 3 percent in Q4.
Rocket TPO, Rocket’s wholesale division, kicked off this year’s party on Friday, announcing an internal conforming limit that represents a 5.3 percent increase over the 2024 limit. Pennymac TPO and Pennymac Correspondent followed suit this week.
Fear of missing out
That it’s now standard operating procedure for lenders to jump the gun on the FHFA’s official conforming loan limit announcement reflects the fierce competition for homebuyers — and the fear of missing out on any business.
UWM, a wholesale lender that funds loans originated by mortgage brokers, overtook Rocket as the nation’s biggest lender in 2022.
While Rocket does most of its business directly with consumers, it’s been working to grow its partner network, which includes mortgage brokers.
In reporting a $178 million second-quarter profit on Aug. 1, Rocket said mortgage originations were up 10 percent from a year ago, to $24.7 billion. While Rocket originated more than half (53 percent) of those mortgages directly with consumers, it depended on its partner network for the remaining 47 percent of Q2 originations — up from 44 percent in Q2 2023.
On Sept. 3, Rocket announced it had hired mortgage technology veteran Dan Sogorka as general manager of Rocket TPO to help the company win more business from mortgage brokers.
Rate — the “doing business as” name of Guaranteed Rate Inc. since the company rebranded in July — sponsors 2,074 mortgage loan originators working out of 476 branch offices, according to records maintained by the Nationwide Mortgage Licensing System (NMLS).
Rate’s joint venture with Anywhere Real Estate, Guaranteed Rate Affinity, has 456 loan originators and 252 branches. The company’s joint venture with @properties, Proper Rate, sponsors 51 originators.
Pennymac generated $99.4 billion in 2023 mortgage loan production, with 72 percent of that business coming through the correspondent channel, 8 percent from mortgage brokers, and 5 percent directly from consumers, the company said in its most recent annual report to investors.
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