As prices continue to rise, major lenders like Rocket are taking proactive steps to help homebuyers avoid jumbo loan pricing by anticipating FHFA’s official announcement.
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The largest mortgage lender in the nation, United Wholesale Mortgage, is following the lead of competitors Rocket and Pennymac by increasing its baseline conforming loan limit for single-family properties to $802,650 starting on Wednesday, Sept. 18.
Rate, based in Chicago, is set to do the same for borrowers locking rates on or after Sept. 24, joining the movement to assist certain homebuyers in avoiding more stringent underwriting and higher rates for jumbo loans when purchasing homes above the current conforming loan limit of $766,650.
“Rate is committed to providing our customers with the best home financing options in the market, and we are pleased to offer higher conforming loan limits early to them,” said Rate executive Jeremy Collett in a statement to Inman.
Jumbo mortgages that exceed the conforming loan limit are not eligible for purchase and guarantee by mortgage giants Fannie Mae and Freddie Mac. The limit is adjusted annually as home prices rise, but the official announcement by FHFA isn’t expected until November.
Lenders have taken to increasing their limits before an official FHFA announcement, allowing homebuyers to benefit from jumbo loans priced as conforming.
Lenders have the option to hold jumbo loans priced as conforming until Jan. 1, and then sell any loans 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 began treating loans up to $750,000 as conforming in October, even though the official limit was $726,200. This move paid off as the conforming loan limit was raised by $39,350 on Jan. 1 — a 5.4 percent increase.
This increase was the smallest in years, with the baseline conforming loan limit for single-family homes rising by a record 18 percent in 2022 and another 12.4 percent in 2023.
Based on the latest data from FHFA, U.S. home prices increased by 5.7 percent in the year ending June 30. However, FHFA will consider appreciation for the year ending Sept. 30 when determining the 2025 conforming loan limit.
Lenders appear to be taking a cautious approach in anticipating FHFA’s decision, assuming a slowdown in price appreciation. Fannie Mae forecasts a decrease in home price appreciation to 3.7 percent in Q3 2024 and 3 percent in Q4.
Rocket TPO, Rocket’s wholesale division, led the charge this year by announcing an internal conforming limit that is 5.3 percent higher than the 2024 limit. Pennymac TPO and Pennymac Correspondent followed suit this week.
Fear of Missing Out
The fact that lenders now anticipate FHFA’s official conforming loan limit announcement reflects the intense competition for homebuyers and the fear of missing out on business opportunities.
UWM, a wholesale lender that finances loans originated by mortgage brokers, surpassed Rocket as the nation’s largest lender in 2022.
While Rocket primarily conducts business directly with consumers, it has been expanding its partner network, which includes mortgage brokers.
In its second-quarter earnings report on Aug. 1, Rocket announced a $178 million profit, with mortgage originations up 10 percent from the previous year to $24.7 billion. While more than half of these mortgages (53 percent) were originated directly with consumers, Rocket relied on its partner network for 47 percent of Q2 originations — up from 44 percent in Q2 2023.
On Sept. 3, Rocket revealed the hiring of mortgage technology expert Dan Sogorka as general manager of Rocket TPO to increase business from mortgage brokers.
Rate, formerly Guaranteed Rate Inc., sponsors 2,074 mortgage loan originators across 476 branch offices, according to NMLS records.
Rate’s joint venture with Anywhere Real Estate, Guaranteed Rate Affinity, has 456 loan originators and 252 branches. Its joint venture with @properties, Proper Rate, sponsors 51 originators.
In 2023, Pennymac generated $99.4 billion in 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, according to the company’s most recent annual report to investors.
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Contact Matt Carter via email.