As prices rise, it’s becoming standard operating procedure for major lenders like Rocket to help homebuyers avoid high mortgage rates by getting a jump on the FHFA’s official declaration.
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The nation’s largest lender, United Wholesale Mortgage, is matching the moves of rivals Rocket and Pennymac and raising its base lending limit for single-family properties to $802,650 effective Wednesday, September 18.
Chicago-based Rate says it will do the same for borrowers with lock-in rates on or after Sept. 24, who have joined the organization to help other homebuyers avoid what can be tough underwriting and high jumbo loan rates when buying homes above the current consensus loan limit. for $766,650.
“Rate is dedicated to providing our customers with the best home financing options in the market and we are very excited to open up more flexible limits,” said Rate CEO Jeremy Collett in a statement to Inman.
Jumbo loans that exceed the agreed loan limit are closed for purchase and guaranteed by mortgage lenders Fannie Mae and Freddie Mac. The limit is adjusted every year when home prices rise, but an official announcement — by Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA) — isn’t expected until November.
When annual home prices rose to double digits during the pandemic, lenders began the practice of raising their limits before the FHFA’s official announcement, giving home buyers a break by setting jumbo loan rates as if they were in agreement.
Lenders can hold large loans that they have priced as flexible until Jan. 1, then sell any loans below the 2025 statutory limit corresponding to Fannie and Freddie’s loan limit.
Baseline and loan limit, 2000-2024
Source: Federal Housing Finance Agency.
Last year Rocket, UWM and Rate all began treating loans up to $750,000 as if they were in agreement in October when the legal limit was still $726,200. That proved to be a safe bet, as the credit limit was raised by $39,350 in Jan. 1 – an increase of 5.4 percent.
It was the smallest increase in years, with the base rate for single-family home loans rising by 18 percent in 2022 and another 12.4 percent in 2023.
According to the latest numbers from the FHFA, US home prices rose 5.7 percent during the year ending June 30. But the FHFA will look at appreciation for the year ending September 30 when setting the 2025 consensus loan limit.
Lenders seem to be playing it safe again in getting FHFA, assuming that price appreciation is cooling. Fannie Mae forecasts predict home price appreciation will slow to an annual average of 3.7 percent through Q3 2024 and 3 percent in Q4.
Rocket TPO, the wholesale division of Rocket, kicked off this year’s party on Friday, announcing an internal consensus limit that represents a 5.3 percent increase over the 2024 limit. Pennymac TPO and Pennymac Reporter followed suit this week.
Fear of missing out
That it is now standard practice for lenders to jump the gun on an official announcement agreeing to the FHFA loan limit reflects the fierce competition among homebuyers – and the fear of missing out on any business.
UWM, a wholesale lender that funds loans originated by home sellers, surpassed Rocket as the nation’s largest lender in 2022.
Although Rocket does most of its business directly with consumers, it has been working to expand its network of partners, including real estate agents.
When it reported second-quarter profits of $178 million on Aug. 1, Rocket said mortgage originations increased 10 percent from last year, reaching $24.7 billion. While Rocket originated more than half (53 percent) of those loans directly with consumers, it relied on its network of partners for the remaining 47 percent of Q2 originations – up from 44 percent in Q2 2023.
On September 3, Rocket announced that it has hired real estate technology veteran Dan Sogorka as general manager of Rocket TPO to help the company win more business from real estate agents.
Rate – the “doing business as” term of Guaranteed Rate Inc. since the company was rebranded in July – it has sponsored 2,074 mortgage loan originators working in 476 branch offices, according to records kept 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, Properties Rate, is sponsoring 51 founders.
Pennymac did $99.4 billion in 2023 in loan originations, with 72 percent of that business coming through the contact channel, 8 percent from real estate agents, and 5 percent from direct buyers, the company said in its latest annual report to investors. .
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