Industry group ACTUALLY WANTS loan limits lowered

by Ryan Smith14 Oct 2013

So it looks like there’s at least one trade group out there that thinks Ed DeMarco’s proposal to reduce maximum loan limits for Fannie Mae and Freddie Mac is a good idea. On Friday, the American Securitization Forum sent a letter to DeMarco, the acting head of the Federal Housing Finance Agency, expressing support for “at least marginally” reduced loan limits.

The maximum limit for mortgage loans backed by Fannie and Freddie is currently $417,000 in much of the country, but ranges up to $625,500 in more expensive areas. FHFA announced last month that it was considering a reduction in the size of the loans that could be backed by the mortgage giants, which were placed under the agency’s conservatorship in 2008.

In his letter to DeMarco, ASF Executive Director Tom Deutsch expressed support for the proposal. Deutsch said that the current high loan limits of Fannie and Freddie – referred to collectively as government-sponsored enterprises or GSEs – lent them an unfair advantage over private capital.

“Some commentators express the view that, in addition to other related measures, it is important to maintain conforming loan limits at their current high levels at this time in order preserve the GSE-guaranteed market share, as the housing recovery remains fragile and private capital has not yet entered the housing finance market in significant amounts,” Deutsch wrote. “However, we believe that the reverse is true—the factors that maintain the GSEs’ high market share are some of the same factors that are keeping private capital out of these markets.”

ASF’s position at least has the advantage of novelty. More than a dozen other industry groups have gone on record opposing the reduction. 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.

Members of Congress aren’t so hot about the idea, either. Sixty-six House members signed an Oct. 10 letter to DeMarco slamming the plan.


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