A proposal has been made to begin the process of lowering the size of the maximum loan that can be purchased or guaranteed by Fannie Mae and Freddie Mac.
Last month, the Federal Housing Finance Agency issued the conforming loan limit on Fannie and Freddie loans for 2014.
The baseline single-family conforming limit was left at $417,000, while the maximum loan amount for properties in some high-cost areas was left at $625,500.
On Monday, FHFA said it is issuing a public notice about a plan to reduce the statutory maximum loan limit for one-unit properties to $400,000 from $417,000.
The regulator seeks public comment on the potential reduction, the six months advance notice period and whether the reduction should happen in stages.
In higher cost areas, the limit would be cut to $600,000 from $625,000.
“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 announcement said. “Reducing the limits is also in line with President Obama’s August 2013 request that FHFA reduce loan limits in order to reduce the government’s footprint in the mortgage market.”
In addition to reducing the secondary lenders’ share of the jumbo market, the move would encourage private investment in the mortgage market and reduce taxpayer exposure.
No final decision is expected before the comments have been reviewed, and loans originated prior to Oct. 1, 2014, are not expected to be impacted.
Comments should be directed to [email protected].
