FHFA proposes to cut GSE loan size over time

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Dec. 18, 2013 – The Federal Housing Finance Agency is taking comments until March 20 on a proposal to gradually reduce the maximum size of loans government-sponsored agencies Fannie Mae and Freddie Mac are allowed to purchase.

The agency, in an announcement Tuesday, cited its goal of reducing the GSEs’ market presence under its conservatorship. It cited President Obama’s request in August that the FHFA reduce loan limits. The current maximum loan limit for one-unit properties is $417,000, which the proposal would reduce by 4 percent to $400,000. The same percentage reduction would be applied to loan limits in high-cost areas, bringing the current limit of $625,000 down to $600,000.

The agency also requested comment on whether advance notice of six months for the limits would be enough. The change would not affect any loans originated before Oct. 1, 2014. NAFCU will issue a regulatory alert on the proposal soon.

The agency had planned earlier to reduce the GSEs’ loan limits as of Jan. 1, 2014, but held off following requests from financial industry trades, including NAFCU, concerned about the negative impact on credit availability and the housing recovery.

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