Trades Question FHFA’s Authority to Lower Loan Limits

The Federal Housing Finance Agency does not have the authority to reduce the loan limits on Fannie Mae and Freddie Mac loans below the current $417,000 floor, according to industry trade groups.

There have been reports the GSE regulator is considering lowering the floor to $400,000.

But a joint letter by 15 organizations points out that the Housing and Economic Recovery Act of 2008 specifically prohibits a reduction in the $417,000 floor.

“Not only is lowering loan limits bad for housing, we question to what extent FHFA’s authority would allow for such a change considering congressional intent when passing the HERA law was certainly opposed to a reduction,” according to the Oct. 8 letter.

The letter is signed by groups representing, builders, Realtors, credit unions, mortgage banking companies, mortgage insurers and title companies.

Currently, the GSEs can purchase a loan with the principal balance of up to $417,000 anywhere in the U.S.

“A reduction of the conventional conforming loan limit to $400,000 would have impacted nearly 154,000 borrowers in 2012, many of whom were in markets still in recovery,” the letter says.