Thursday, October 24, 2013

FHFA: No Change in Conforming Loan Limits for at least Six Months

by Bill McBride on 10/24/2013 05:21:00 PM

From Nick Timiraos at the WSJ: DeMarco: No Mortgage Limit Declines Before Spring 2014 (ht Soylent Green is People)

Federal officials will delay any reduction in the maximum size of home-mortgage loans eligible for backing by Fannie Mae and Freddie Mac until next spring at the earliest amid heavy resistance from the real-estate industry and many lawmakers in Congress.

Currently, Fannie and Freddie can guarantee mortgages that have balances as high as $417,000 in most of the country and up to $625,500 in expensive housing markets, including parts of California and New York. Loans within the limits, called “conforming” loans ...

Potential loan-limit changes will be announced six months ahead of their implementation date, [DeMarco] said, and such changes wouldn’t be announced until November at the earliest. “Anything we do would have a long lead time and would be gradual and measured,” said Mr. DeMarco.

When the agency does move ahead with loan limit declines, the declines will apply to both the national limit and the high-cost limits, which were enacted on an emergency and temporary basis by Congress in 2008
It will be politically difficult to lower these limits, and the limits probably wouldn't be adjusted down very much.  The conforming loan limit was $252,700 in 2000. Using the FHFA Purchase Only index, the national conforming loan limit might be lowered to $360,000 or so.

Using the CoreLogic or Case-Shiller Comp 20 indexes, the conforming loan limit might be lowered to $380,000 to $395,000. Not a large downward adjustment for the national limit.

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