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TH E M R EP O RT | 57 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Setting Limits FHFA has announced new maximum conforming loan limits for mortgages in 2019. T he Federal Hous- ing Finance Agency (FHFA) announced the maximum conform- ing loan limits for mortgages that Fannie Mae and Freddie Mac will purchase or guarantee in 2019. This year will see an increase at $484,350 in maximum conforming loan limit for one-unit proper- ties compared to $453,100 in 2018. According to The Housing and Economic Recovery Act (HERA), the baseline for conforming loan requires an adjustment for Fannie Mae's and Freddie Mac's conform- ing loan limits. This practice helps adjust loan limits based on changes in the average U.S. home price. FHFA's seasonally adjusted, expanded-data HPI, revealed an average increase of 6.9 percent in house prices between the third quarters of 2017 and 2018, result- ing in an increase along the same margins in the baseline maximum conforming loan limit in 2019. The maximum loan limit will be higher than the baseline loan limit in high-cost area limits, where 115 percent of the local me- dian home value exceeds the base- line conforming loan limit, FHFA stated. Median home values experienced a surge in high-cost areas the previous year, which in turn drove up the maximum loan limits in many areas. The new ceiling loan limit for one-unit properties in most high-cost areas is projected to be $726,525—or 150 percent of $484,350. Alaska, Hawaii, Guam, and the U.S. Virgin Islands operate under special statutory provisions that establish different loan limit calcu- lations with a baseline loan limit of $726,525 for one-unit properties. The maximum conforming loan limit will be higher in 2019 in all but 47 counties or county equivalents in the U.S. due to rising home values and a general increase in the baseline as well as ceiling loan limit, the FHFA indicated. Dodd-Frank and Self- Employed Americans Why is it so hard for self- employed to get a loan? S elf-employed people, with a lack of pay stubs or W-2s, may find it hard to have their income verified when it becomes time to get a home loan. According to the Ur- ban Institute, self-employed people constitute nearly 10 percent of the nation's workforce and earn more on average than salaried work- ers, but these workers were hit hardest during the recession, and many are still struggling to gain homeownership. Urban Institute looked at how policymakers such as the Consumer Financial Protec- tion Bureau (CFPB) may improve these potential buyer's situations. Self-employed households have a higher rate of homeowner- ship than salaried households. However, these households were hit the hardest following the recession, and have struggled to gain ground. Despite the high rate of homeownership, self-employed households are now less likely to obtain a mortgage than salaried households. In 2016, self-employed workers earn a median annual income of self-employed households earned a median $66,900 compared with $56,100 for salaried households. However, these households are more likely to experience income volatility, due to varying incomes month-to-month. Urban Institute notes that the January 2019 review of Dodd- Frank should focus partly on the inadequate mortgage market for self-employed households. Despite their higher income, these house- holds were hit harder by the finan- cial crisis and have been slower to recover, and Urban Institute notes that many have not returned to their pre-crisis income levels. "But part of it reflects the real- ity that at any income level, both mortgage use and the home- ownership rate for self-employed households have declined more than they have for salaried house- holds," Urban Institute states. However, non-QM loans are aiming to fill this gap. According to industry estimates, non-QM loans currently represent around 3 percent of the market and are expected to double in size. A majority of non-QM loans are made out for primary residences, especially in California, Florida, Arizona, New Jersey, Texas, Utah, and Colorado. In fact, self- employed individuals represent around 60 percent of the non-QM loan business for mortgage com- panies like Deephaven, according to estimates. "We hope the data presented in this brief provide useful insights to the BCFP as it completes its assessment and evaluates potential changes to the qualified mortgage rule," Urban concludes. Median home values experienced a surge in high- cost areas the previous year, which in turn drove up the maximum loan limits in many areas.