The Sept. 27 letter notes that the Federal Housing Finance Agency is considering actions to reduce the $625,500 maximum loan limit on GSE-guaranteed loans.
“Such reductions could negatively impact the economic recovery, disproportionately harm residents and homebuyers in areas with high housing costs and contravene standards specifically set by Congress to account for regional variations in home prices,” the senators say.
With the backing of the Obama administration, the FHFA has been looking at reducing the maximum loan limit and the $417,000 floor loan limit as a way to reduce the GSEs’ footprint in the mortgage market.
The legislators recognize the FHFA has broad powers as a conservator of Fannie and Freddie.
“But reducing the loan limits may actually worsen the financial condition of Fannie Mae and Freddie Mac—in direct contravention of FHFA’s responsibility as a conservator,” the senators’ letter say.
The 11 Democratic senators and two Republican senators want the FHFA to describe the legal basis it would use to authorize a reduction in the GSE loans limits.
And before the GSE regulator takes any action, they want a quantitative analysis of the impact a loan limit reduction would have on national and regional housing markets, including the impact on households in high-cost areas.