FHFA Wants to Hear Your Thoughts on Proposed Loan Limits

The Federal Housing Finance Agency (FHFA) says it wants input on a plan to lower the ceiling for loans eligible for purchase by Fannie Mae and Freddie Mac.

Under FHFA’s proposed plan, the $417,000 maximum limit for single-family homes in most areas around the country would be lowered to $400,000, a reduction of about 4 percent. Areas with higher limits would see a similar cut, with the $625,500 maximum dropping to $600,000.

As FHFA said in its announcement, the proposed decrease “furthers the goal of contracting the market presence of Fannie Mae and Freddie Mac gradually over time,”—an objective laid out in the agency’s Strategic Plan for Enterprise Conservatorships.

“The loan purchase limits, which FHFA would set under its authority as conservator of Fannie Mae and Freddie Mac, would modestly reduce Fannie Mae’s and Freddie Mac’s business at the high end of the market, invite private capital to re-enter the market, and limit taxpayer exposure to losses,” the release goes on to say.

Among the agency’s concerns are whether an advance notice of six months is adequate, whether it is preferable to work with a multi-year schedule of decreases, and when any future loan limit reductions should be enacted.

While there has been little public reaction from the industry regarding the proposal, history would suggest many housing groups will oppose reduced limits, with theNational Association of Realtors applauding an earlier announcement that conforming loan limits will stay as they are for the time being.

Nevertheless, FHFA’s announcement includes an assurance that no final decision on purchase limits will be made until comments are reviewed and that the discussed changes will not affect loans originated before October 1, 2014.

FHFA is accepting the public’s input on its proposal until March 20, 2014. Comments can be emailed toLoanLimitInput@FHFA.gov.

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