Fannie Mae Move May Ease Rate on Home Mortgages

Slightly cheaper mortgages will be available to more home buyers next year because of an increase in the size of single-family home loans purchased by secondary market agencies.

The Federal National Mortgage Assn. (Fannie Mae) said Monday that it will purchase mortgages as large as $191,250 starting Jan. 1, up from a $187,450 ceiling this year. In Alaska and Hawaii, the ceiling will be 50% higher.

“The new higher loan limit will help struggling young families qualify to buy homes at lower interest rates,” said Mack Powell, president of the California Assn. of Realtors. The trade group estimated that the change will benefit some 5,000 California households in buying homes next year.

A home buyer with a mortgage at the new ceiling would save $73 a month with a fixed-rate loan of 9.5%, instead of 10%, for instance.

Two-family-home residential mortgages will have a limit of $244,650; three-family, $295,650, and four-family, $367,500.

The board of the Federal Home Loan Mortgage Corp. (Freddie Mac) is expected to approve a similar increase when it meets in early December, spokeswoman Audra Capas said.

Together, the two stockholder-owned but congressionally chartered companies finance one in four of the nation’s residential mortgages. They purchase mortgages from lenders, holding some and repackaging others into securities for sale to investors.

Lenders are able to charge interest rates a quarter- to a half-point lower on mortgages they sell to the companies compared to loans they retain in their own portfolios.

The ceiling increase won’t mean much in most regions, but in high-cost areas such as California and the Northeast, where the average mortgage is near the limit, it will help buyers a bit.