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.


  • by Christie C. | 10/14/2013 9:20:26 AM

    He is obviously NOT in a high cost area.

  • by Bill in Florida | 10/14/2013 10:02:19 AM

    Ok, let me see. So next month we're looking at 97% LTV's going away on conventionals, the max conv. debt ratio will be reduced to 43% soon, they'd like to drop or seriously amend the mortgage interest deduction rules, DC will be capping us at 3% all in, and on top of that let's reduce the conforming mortgage size when it's hard enough to get a good jumbo wholesale lender to offer competitive pricing or guidelines making a larger pool of what would be considered non-conforming mortgages if they get their way even more expensive for the consumer. So tie both hands and feet behind our back with all the newest and greatest regulation made to stifle not expand a vibrant economy, let's pile it on and soon we'll all be safe because no one will go to the trouble...come on DC, is that the best you can do? Don't you want to mortgage the consumers first born too?

  • by James Wojtaszek | 10/14/2013 4:23:33 PM

    I honestly believe that the CFPB and FHFA is causing problems in the lending arena. You have the CFPB that is the highest paid Government Agency telling us how we should curtail mortgage charges only if your a Broker. That does not apply to Banks and Correspondent Lending. And reducing the mortgage amount to $400,000 is just going to increase the borrower rate & therefore payment. We already disclose everything and give our customers credit towards their closing cost which would be eliminated with this 3% rule due to the fact it apply's to small mortgage amounts. If the customer qualifies for a mortgage grant him the mortgage that he wants! We have gone to the extreme and we are making this a renters market so nobody can qualify to finance or refinance due to the debt ratio cannot exceed 43%. What happens to FHA? This is the mortgage to help out first time buyers who are charged a high monthly mortgage insurance as well as a high upfront mortgage insurance. That's how we take care of our FHA customers just charge them more. It sounds like a subprime mortgage but when the Government does it, it's acceptable!


Should CFPB have more supervision over credit agencies?