The Federal Housing Financing Agency announced shortly before Thanksgiving that it would not lower conforming home loan limits in 2014. The move was slightly unexpected given that just a few months ago, the government’s plan was to reduce the maximum size of a home loan backed by Fannie Mae and Freddie Mac on January 1. 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.
In early 2009, the Housing and Economic Recovery Act of 2008 upped the limit on conforming loans 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. If government-backed loan limits dropped as planned in the early part of next year, it would likely have resulted in higher down payments and interest rates for borrowers.
This article originally published at http://dc.urbanturf.com/articles/blog/fannie_freddie_will_not_change_loan_limits_in_2014/7875
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