REAL ESTATE NEWS

FANNIE MAE, FREDDIE MAC WON'T REDUCE LOAN LIMITS, REGULATOR SAYS
Source: LA Times

Mel Watt, the director of the Federal Housing Finance Agency, gave his first public speech this week since becoming the agency’s director in January. The speech outlined a broad shift in housing-finance policy, including maintaining the mortgage finance giants’ role in parts of the housing market, spurring more home lending, and aiding distressed homeowners.

Making sense of the story

• Due to concerns about the slowing housing market, Watt announced that the government-sponsored enterprises would not reduce the limits on loans they guarantee.

• The CALIFORNIA ASSOCIATION OF REALTORS® President Kevin Brown commented, “C.A.R. commends FHFA Director Melvin Watt for his announcement today that the FHFA will not reduce loan limits on loans eligible for purchase by Fannie Mae and Freddie Mac. Lower loan limits would have had an adverse effect in many parts of the country, but especially here in California where rebounding home prices and decreasing home affordability would hamper mortgage activity and impact the housing recovery.”

• Currently, Fannie and Freddie will buy loans as large as $417,000 in most markets and as large as $625,500 in certain “high-cost” markets, including southern California.

• Watt stated he would not comment on housing finance reform efforts, noting that “Congress and the [Obama] administration have the important job of deciding on housing finance reform legislation, not FHFA.”

• The director announced the launch of a neighborhood stabilization pilot project in Detroit to help stabilize communities hardest hit by the foreclosure crisis.

• Watt said this year the FHFA would explore establishing an independent dispute resolution program when lenders believe a repurchase is unwarranted.

• Notably, Watt commented that he would focus on reducing taxpayer risk without necessarily shrinking the size of Fannie Mae and Freddie Mac, thereby suggesting he will aim to perpetuate the presence of the two government-sponsored enterprises in mortgage finance.

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