The Federal Housing Finance Agency has come under fire for considering a reduction on the maximum loan amount that Fannie Mae and Freddie Mac are able to purchase.
The National Association of Realtors, in a letter to the FHFA, questioned the regulator’s authority to make such a move. U.S. Congress, the letter said, has indicated an unwillingness to allow loan limits to decline.
“If you had the authority to ignore the prohibition against reducing loan limits, what would prevent you from making other fundamental changes?” Gary Thomas, NAR’s president, told the Wall Street Journal.
The trade group also argued that reducing loan limits would be bad policy, saying large mortgages generally require heftier down payments and higher credit scores.
“An arbitrary reduction in existing limits, in the hope it will encourage more private sector lending, is a social policy experiment that risks dampening or reversing the ongoing recovery in the housing market and the economy as a whole,” Thomas told the Journal.
The FHFA, for its part, has said in the past that its broad powers overseeing the government-controlled mortgage companies allow it to issue such a directive that limits firms’ ability to purchase loans above a specified limit. A spokeswoman for the regulator did not immediately reply to the Journal’s request for comment. [WSJ] — Julie Strickland