Industry, Congress Urge DeMarco Not to Lower Loan Limits

Federal Housing Finance Agency Acting Director Edward DeMarco is deliberating lowering the loan limits for Fannie Mae and Freddie Mac. Congress and the industry, however, are voicing a singular opposition, claiming such action would be detrimental to the housing recovery that is starting to take place across the country.

Members of Congress and several industry groups have sent letters to DeMarco over the past week urging him not to lower the GSEs’ conforming loan limits.

“Lowering loan limits further restricts liquidity and makes mortgages more expensive for households nationwide,” stated the National Association of Federal Credit Unions (NAFCU) in a letter signed by several other industry groups.

The association pointed out that many Americans still struggle to gain access to credit, and in the past year most conforming loans went to borrowers with credit scores ranging between 760 and 770.

The Mortgage Bankers Association (MBA) expressed similar concern in a letter it sent October 4, saying, “Any reduction in loan limits would have significant impact on thousands of families caught between the current limits and new, lower limits.”

On the other hand, reducing the loan limit would “significantly increase demand for private capital,” according to Fitch Ratings. However, the agency admitted “it is not clear how much impact this would have on the nascent recovery in the housing market.”

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