FHFA won't mess with loan limits ... yet

by Ryan Smith28 Oct 2013

The Federal Housing Finance Agency won’t be reducing maximum loan limits for Fannie Mae and Freddie Mac until next spring at the earliest, according to Acting FHFA Director Edward DeMarco.

DeMarco said Thursday that reducing the loan limits could place even more burdens on an industry already saddled with new regulations set to take effect in January, the Wall Street Journal reported Friday.

“We needed more time. The industry had an awful lot going on on January 1,” DeMarco said. “The better course was to wait.”

Currently, Fannie and Freddie back mortgages with balances up to $417,000 in most of the country and $625,000 in more expensive markets. DeMarco has been making noises about lowering the loan limits since September, but he’s received massive pushback from within the industry and the government.

More than a dozen industry groups have gone on record opposing the plan. Indeed, groups representing real-estate agents, builders, mortgage bankers, mortgage insurers and title companies signed an Oct. 8 joint letter questioning whether FHFA had the authority to reduce the loan limits.

“We believe such changes at this time would have a very disruptive impact on the availability of affordable housing credit, on our housing recovery and our economy as a whole. Not only is lowering loan limits bad for housing, we question to what extent FHFA’s authority would allow for such a change,” the letter stated.

DeMarco maintains the FHFA has the authority to reduce the loan limits without congressional approval. Several members of the House of Representatives, however, beg to differ.

“Congress did not give FHFA the authority to reduce the loan limits. In fact, we included language in statute explicitly stating that the loan limits could not be reduced,” Rep. Gary G. Miller (R-Calif.), said Oct. 10. Miller was one of 66 House members from both parties who signed a letter to DeMarco warning him to leave the limits alone.

“Housing prices are on the rise, but lowering the loan limits could put the housing market’s fragile recovery at risk. This is not consistent with FHFA’s role as conservator,” Miller said. “Lowering the limits would place taxpayers at greater risk due to a decline in home values, ultimately harming (Fannie and Freddie’s) financial positions.”



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