The Federal Housing Finance Agency 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 would cut by 4 percent, to $400,000 from $417,000 the loan purchase limit for conforming loans in most markets, including the Chicago area. 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. However, 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. In the Chicago area, the maximum loan size will be reduced to $365,700, from the current $410,000.
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. In Illinois, about 12,500 home purchase and refinance mortgages would have been affected.
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.
(Source : Chicago Tribune)