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Fannie, Freddie to Drop Loan Limits in 2014

by UrbanTurf Staff

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The Wall Street Journal recently reported on the government’s plan to reduce the maximum size of a home loan backed by Fannie Mae and Freddie Mac in early 2014. Right now, Fannie and Freddie will back loans of up to $417,000 in most of the country and up to $625,500 in more expensive housing markets.

From the WSJ:

The Federal Housing Finance Agency, which regulates Fannie and Freddie, hasn’t announced how far it will drop the loan limits, which would take effect Jan. 1, 2014, and a spokeswoman declined to elaborate on specifics. But in a statement, the agency said a “gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayers’ mortgage-risk exposure…and expanding the role of private capital in mortgage finance.”

In early 2009, the Housing and Economic Recovery Act of 2008 upped the limit on conforming home loans (the maximum size of a loan Fannie Mae and Freddie Mac can guarantee) in places with high homes prices like DC from $417,000 to $729,750 because the availability of those size loans in the private market all but disappeared. The insurance that loans up to $729,750 would be backed was reinstated in the economic stimulus bill passed at the start of the Obama administration, and was renewed again in 2010. It wasn’t until late-2011 that the loan limits in more expensive areas dropped back to $625,500.

These days, if a lender puts a borrower’s loan application through Fannie Mae and Freddie Mac’s automated underwriting system, and it is approved, then the government assumes the risk of a borrower defaulting on a loan up to $625,500, not the lender. As the government-backed loan limits plan to drop in the early part of next year, it will likely result in higher down payments and interest rates for borrowers, and dealing with more stringent underwriting guidelines from lenders.

See other articles related to: loan limits, freddie mac, fannie mae

This article originally published at http://dc.urbanturf.com/articles/blog/fannie_freddie_to_drop_loan_limits_in_2014/7530

3 Comments

  1. charlie said at 2:42 pm on Monday September 9, 2013:

    It doesn’t seen to make much difference in DC.  The rates I got for a conforming (417) were much better than a larger loan even if approved for DC.

    Maybe they liked the 300K down, but I was still looking at a larger down payment on the higher loan amount.

  1. Doug Francis said at 4:40 pm on Monday September 9, 2013:

    The Federal Housing Finance Agency must still believe that it is 2009. Listen to recent home buyers and the hoops they had to jump through! Maybe then the FHFA will understand that people getting loans today are already being super scrutinized. (yes, they can pay their mortgage)

  1. Greylin said at 9:34 pm on Tuesday September 10, 2013:

    During a time where home prices are rising and interest rates are already climbing, I think it would be best to leave the loan limits alone. We are seeing a healthy market right now and loans are already significantly harder to get (which is better for the housing market) but we have to draw the line somewhere. Some people do not have 300K down. They just want a home with a purchase price close to that. If you want a single family home in this area you can forget getting it for less than 417K, and if you are trying to move up to a larger home for a growing family in a good school district you are lucky to get something for under the current loan limits.

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