Watt: FHFA won’t raise loan limits, enter GSE reform debate

by Ryan Smith14 May 2014
The director of the Federal Housing Finance Agency says the FHFA won’t be raising loan limits – or entering the debate on mortgage reform.

Speaking at the Brookings Institution Tuesday, FHFA Director Mel Watt said the mortgage reform debate was best left to Congress.

“One topic that is not on FHFA’s agenda, because it’s not part of our statutory mandate, is housing finance reform legislation. My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA,” Watt said. “I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary. However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA. Instead, our task is to continue to fulfill our statutory mandates, to execute our Strategic Plan and to manage the present status of Fannie Mae and Freddie Mac.”  

Watt also addressed an unpopular proposal made by his predecessor, former Acting Director Edward DeMarco. In September, DeMarco announced his intention to lower the maximum sizes of loans purchasable by Fannie and Freddie, a move which prompted immediate condemnation from industry groups and housing advocates. Upon taking the reins at the FHFA, Watt immediately suspended to plan to further evaluate its implications.

“As market participants are already aware, FHFA released a proposal last year suggesting that the agency would use its conservatorship authority to lower the mortgage amounts eligible for guarantee by Fannie Mae or Freddie Mac,” Watt said Tuesday. “Many groups and individuals submitted feedback in response to the Request for Input, and FHFA has thoroughly reviewed and evaluated those responses. I am announcing today that FHFA will not use its authority as conservator to reduce current loan limits. This decision is motivated by concerns about how such a reduction could adversely impact the health of the current housing finance market.”


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