FANNIE MAE, FREDDIE MAC RAISE MORTGAGE BUY LIMITS; HIGHER COST CEILING MAY HELP MORE PURCHASERS AFFORD HOMES.

Byline: Priscilla Fusco Bloomberg News

Fannie Mae and Freddie Mac said they will increase the limit on the size of single-family mortgages they will buy in 1999 by 5.66 percent to $240,000 from $227,150.

The announcement is significant to next year's home buyers, since mortgages that fall within Fannie Mae's and Freddie Mac's purchase limits generally carry lower interest rates and fees for consumers than loans above those limits.

Loans that the companies will fund are called conforming loans; those above the limit are jumbo loans.

The increase announced Wednesday is in line with the change in the average price of a home for the year ended in October, which was $175,200, as estimated by the Federal Housing Finance Board. The two companies' government charter requires them to base their mortgage purchase limits on the federal index.

The increased limit could help more people obtain mortgages because more mortgages would be eligible to be purchased by the two mortgage giants. Fannie Mae and Freddie Mac make their profits and help keep the mortgage market liquid by purchasing mortgages from banks and other original lenders. They keep some mortgages in their portfolios and repackage others as mortgage-backed securities. Fannie Mae and Freddie Mac are shareholder-owned government-sponsored enterprises.