WASHINGTON Edward DeMarco, acting director of the Federal Housing Finance Agency, said Thursday that the agency has no immediate plans to lower the size of the loans the government-sponsored enterprises can buy, though he left the door open for future reductions.
DeMarco spoke at a housing finance reform event hosted by Zillow and the Bipartisan Policy Center, laying out the progress the agency has made in implementing its strategic plan so far and describing some next steps.
The FHFA has faced increasing pressure in recent weeks from the mortgage industry and some lawmakers against reducing the conforming loan limits at Fannie Mae and Freddie Mac, after rumors surfaced that the agency was preparing to do so. But DeMarco said during his remarks that the agency won't lower the loan limit threshold until at least next spring.
"FHFA will follow its practice of announcing the 2014 conforming loan limits in late November, at which time further information will be provided on potential reductions in the size of loans the Enterprises will guarantee going forward," he said, adding that the agency expects to give the agency "at least six months' notice of any change."
He added that "any change would be measured and gradual so as not to disrupt markets," noting that reductions will be "across the board" rather than just for more expensive regions. The current loan limits for the GSEs are $417,000 nationwide and $625,500 in high-cost areas.
DeMarco told reporters Thursday morning that the decision not to lower the limits at the beginning of next year came in part because the industry faces a slate of new mortgage rules, including the Consumer Financial Protection Bureau's qualified mortgage rule.
"We still have to work to do on analyzing how to implement this, what the impact [will be] and so forth," said DeMarco. "And based on that I concluded that we needed more time and that the industry had an awful lot going on Jan. 1, and that the better course was to wait and provide a sense that there would be an ample amount of time for market participants to adjust to this."
DeMarco said during his speech that the agency will also continue to monitor the need to further increase guarantee fees at the GSEs, though he said that the fees are reaching a level that could help attract more private sector participants.
"A key motivation behind increasing enterprise guarantee fees is to bring their pricing for credit risk closer to what would be required by private sector providers," he said during his speech. "While that level is difficult to evaluate with precision, I believe we are getting closer to a level that would encourage more private sector participation, and we plan to continue pursuing gradual guarantee fee increases in the near future."