The reduction in the Fannie Mae/Freddie Mac loan limit could trim home sales by up to 5%, further delaying a recovery in the housing market, according to industry officials speaking at a Progressive Policy Institute conference Tuesday.
“Somewhere around 5% of the market no longer has access to mortgages unless they have a 750 credit score and a 20% downpayment,” said David Stevens, president and chief executive of the Mortgage Bankers Association.
This may be marginal, he noted, “but every couple of percentage points ultimately has a profound effect on the extent by which the housing market is going to stay flat, delaying a recovery.”
Realogy Corp. president and CEO Richard Smith stressed that the Obama Administration needs a coherent national housing policy that will lead to a recovery.
However, Congress and the White House allowed the maximum GSE/Federal Housing Administration loan limit to drop down to $625,500 on October 1 from $729,750 where it had been for several years.
In addition, FHA loan limits in hundreds of counties were reduced as well. In total, loan limits fell in 669 counties in 42 states, pricing 4% to 5% of the buying population out of the market, Smith told the PPI housing conference.
The Realogy CEO expects legislation will be introduced to restore the $729,750 maximum loan limit for a few years. “But the damage has been done,” he said. “We are trying to stimulate housing while the lack of a national housing policy is letting it deteriorate,” he said.
