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Obama Administration to Propose Reductions in Support for Housing Market, Lower Loan Limits
According to an article in this morning’s Washington Post by Zachary Goldfarb and Brady Dennis, the Obama Administration is set to release a report detailing its vision for the future of the housing finance system in the United States.  The report will likely recommend slowly weaning the housing market off of government support.  One part of the proposal involves reducing the size of mortgage loans eligible for purchase by Fannie Mae and Freddie Mac:
“The administration is now likely to suggest that Congress allow the policy to lapse as scheduled in September, lowering the loan limit to $625,000.”
There is a statutory limit on the maximum size mortgage loan that Fannie Mae and Freddie Mac are allowed to purchase.  This is known as the conforming limit, and is presently set at $417,000 in most areas of the country.  In some areas where the median home price exceeds the conforming limit, the conforming limit is higher, up to $729,750 (175% of the conforming limit).  Examples of these high cost areas are New York City, Miami, Boston, Washington D.C., and many parts of California, among others.  Loans that fall in between $417,000 and $729,750 are referred to as high balance conforming loans. Currently there are ... more

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