Raising Fannie Mae and Freddie Mac loan limits
There’s a lot of talk about raising Fannie Mae and Freddie Mac loan limits being discussed by congress these days. Currently for a loan to be purchased by one of these GSE’s, the loan must be $417,000 or less. This is known as the conforming loan limit.
Currently congress is discussing raising the conforming loan limit cap to help out the jumbo (or non-conforming) loan market, which is severely lacking during this credit crunch. Most plans right now indicate that any increase will be a temporary one until the credit crunch ends.
However, it appears as though congress will only grant higher conforming loan limits if it comes along with some Fannie Mae and Freddie Mac reform in the form of greater oversight over the GSEs.
So the question is, will the bigger loan limits be worth it with tighter standards?
February 27th, 2008 at 12:14 pm
By raising the loan limit from $417,000 on Fannie Mae and Freddie Mac, the Federal government is in effect nationalizing mortgage insurance for the rich just to jump-start the stalled housing market. That is dangerous short-term planning which could, in a sustained real estate collapse, bankrupt the American treasury already strained by recession, defense and growing entitlement expenses. Even within their existing limits, the GSEs are suffering terrific losses for which Uncle Sam is tacitly held accountable.
No, let Fannie Mae and Freddie Mac continue providing entry level assistance to homeownership, the job for which they were intended, and let the affluent — not the taxpayers — bear responsibity for their own credit risks.