At the end of each November, FHFA updates the CLLs based on rules set forth in HERA. The CLLs take effect a month later on January 1st.
(current year Q3 FHFA HPI – prior year Q3 FHFA HPI) / (prior year Q3 FHFA HPI)which is converted to percentage terms. For example, the 2022 limits were computed as: Percentage Change = (2021Q3 HPI – 2020Q3 HPI) / 2020Q3 HPI = (328.13182917– 277.95477273) / 277.95477273 = 18.05223776 percent HERA requires that the baseline loan limit be adjusted each year to reflect changes in the national average home price. In October 2015, FHFA published a Final Notice in the Federal Register specifying that limits would be adjusted using the nominal, seasonally adjusted, expanded-data (EXP) version of the FHFA House Price Index® (FHFA HPI®). An important caveat is that the CLLs adjustment differs during or immediately following a housing market downturn. By statute, the baseline loan limit remains flat when the national average home price is not increasing. Further, after a period of declining home values, HERA requires that the prior declines be “made up” before the baseline limit can be increased. In such instances, any cumulative house price decline must be fully negated before a loan limit increase can take place. For this reason, the baseline loan limit did not change in 2007 and they remained at the same level until 2017.