Mortgage industry challenges regulator on U.S. loan limits

Reuters

By Margaret Chadbourn

WASHINGTON, Sept 20 (Reuters) - Two powerful housingindustry trade groups are asking U.S. lawmakers to prevent agovernment regulator from lowering the limit on the size ofloans Fannie Mae and Freddie Mac can back,according to a letter obtained by Reuters on Friday.

In a letter to both Democrats and Republicans in the Houseof Representatives, the National Association of Realtors and theNational Association of Home Builders said a reduction in theloan limits could result in "confusion and uncertainty" forpotential borrowers and lenders.

This, in turn, could threaten a budding housing rebound andhurt the broader economic recovery just as it gains traction,they argued.

"Our nation's housing market is still on the path torecovery. While there has been some return of private mortgagelending, without the benefit of a federal guarantee, it remainslimited and available only to the most highly qualifiedborrowers," the letter said.

The Federal Housing Finance Agency wants to reduce theso-called conforming loan limits by the start of next year toshrink Fannie Mae and Freddie Mac's presence in the market andexpand the role of private capital in mortgage finance.

But the two trade groups said the FHFA, which declined tocomment on the letter, lacks the authority to lower the cap onthe size of loans the government-owned mortgage finance giantscan guarantee.

Government-insured mortgages now dominate the housingsector, supporting about nine out of 10 new home loans.

"FHFA Acting Director (Edward) DeMarco appears to be makingdecisions above and beyond this authority provided by Congressand may significantly damage local housing markets," the lettersaid.

The loan limits are based on local median house prices andvary by metro area. In most markets, Fannie Mae and Freddie Maccannot back loans of more than $417,000, although the cap can beas high as $625,500 in pricier areas such as New York City and$721,050 in Hawaii.

The two trade groups want more House of Representativesmembers to sign a letter opposing the proposed cap written byDemocrats Carolyn Maloney and Brad Sherman and Republican GaryMiller.

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