Mortgage Cap For 2 Agencies Tops $200,000
Fannie Mae and Freddie Mac will be able to buy mortgages as large as $202,300 starting Jan. 1, up 6% from the present ceiling, the Federal Housing Finance Board announced Wednesday.
The jump to a record level was quickly embraced by the agencies -- and attacked by thrift executives and housing activists.
The mortgage limit, adjusted each year to reflect changes in a home-price index, has never before been above $200,000.
Fannie Mae and Freddie Mac, formally the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp., buy mortgages from lenders around the country.
The activity is thought to reduce interest rates on loans by 25 to 50 basis points, reflecting the agencies' low funding costs.
Thrifts Not Pleased
While that helps homebuyers, thrifts that hold mortgages complain that it unfairly reduces their profits.
The new loan limit is "ludicrous," said Edmond Shanahan, chief executive of Bell Federal Savings and Loan Association, Chicago. "It was too high before, and now it's even worse."
The raised loan ceiling "underscores the need for legislation to redirect the agencies to the lower half of the market, which is underserved" added Chris Lewis, legislative director for the Association of Community Organizations for Reform Now (Acorn).
Broader Purchases Urged
A move is already afoot in Congress to stimulate the agencies' purchases of loans to people of low or moderate income.
The Federal Housing Finance Board explained the higher limit by reporting that average home prices rose 5.8% in the 12 months through October. By law, the percentage change in October home prices is applied each year to the loan limit.