By Mary Ellen Podmolik
(MCT)—The Federal Housing Finance Agency (FHFA) on Monday detailed a plan to reduce the size of home mortgages that Fannie Mae and Freddie Mac could purchase.
Under the proposal issued for public comment, the FHFA in most markets would cut the loan purchase limit for conforming loans by 4 percent, to $400,000 from $417,000. In high-cost areas, the current loan limit of $625,000 would be trimmed to $600,000.
It was just last month that the FHFA said it was keeping the current loan limits in place. But any change by the agency, the conservator of Fannie Mae and Freddie Mac, would follow in the footsteps already by the Federal Housing Administration.
In reducing the government’s exposure in the mortgage markets, the federal government is hoping that private investors will step in, particularly as housing markets improve.
The FHA last month announced new, lower single-family loan limits for 650 counties nationally, beginning Jan. 1.
If the lower limits on Fannie Mae and Freddie Mac mortgages were in place in 2012, the effect on the market would be “modest,” according to the agency’s analysis. Nationally, about 170,000 mortgages backed by Fannie Mae or Freddie Mac, or 2.9 percent of the mortgages acquired in 2012, had original loan balances above $400,000 limit proposed, the analysis found.
The research also showed that many of the borrowers potentially affected by such a change would be in Illinois, California, Texas, Florida and Colorado.
The FHFA said any changes it makes would not take effect before Oct. 1.
©2013 Chicago Tribune
Distributed by MCT Information Services
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