FHFA Seeks Public Input on Proposed Decrease of GSE Loan Purchase Limits

Julie C. Nichols General

MBA Newslink – Mike Sorohan

The Federal Housing Finance Agency yesterday announced a public comment period on a controversial proposal to gradually reduce the maximum size of loans that Fannie Mae and Freddie Mac can purchase. FHFA said it will send to the Federal Register a request for public input on implementation of the plan, which it and the Obama Administration said would reduce the government’s footprint in the mortgage market.

Setting reduced loan purchase limits furthers the goal of contracting the market presence of Fannie Mae and Freddie Mac gradually over time, one of the key objectives of FHFA’s Strategic Plan for Enterprise Conservatorships,” the agency said. “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.”

Although specifics remain unclear, FHFA has suggested in areas where the statutory maximum loan limit for one-unit properties is currently $417,000, the plan being contemplated would set the loan purchase limit at $400,000, a 4 percent reduction. The loan purchase limit would be reduced by the same percentage in other parts of the country, including those areas where current limits are at $625,500. Those loan purchase limits would be set at $600,000. On Nov. 26, FHFA announced that 2014 maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac would remain at $417,000 for one-unit properties in most areas of the country. However, FHFA said it continues to evaluate further information, and “potential future changes in the maximum size of loans that Fannie Mae and Freddie Mac guarantee will be forthcoming.”

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