U.S. to freeze mortgage loan limit

The Office of Federal Housing Enterprise Oversight said Tuesday that it would freeze the size of so-called conforming loans that carry lower interest rates after U.S. home prices fell in October for the first time in 13 years.

The average price of a U.S. single-family home fell 0.2% to $306,258 in October from a year earlier, the first decline since 1993, OFHEO said. The average home price is tallied by using data from 14,729 loans made by 82 different lenders.

OFHEO sets the limit of loans that can be bought by government-chartered mortgage finance companies Fannie Mae and Freddie Mac based on year-over-year changes in October home prices. The agency will freeze the conforming-loan limit at $417,000 and defer for one year the reduction mandated by law to reflect the October price decline, OFHEO Director James Lockhart said in a statement. The U.S. housing market is flooded with unsold properties because potential buyers are waiting until prices stop falling.

“We made this decision so as not to disrupt the end-of-the-year pipeline of mortgages or the market for mortgage-backed securities,” Lockhart said.

Home resales rose 0.5% in October to 6.24 million at an annualized pace, the National Assn. of Realtors said Tuesday.