The Federal Housing Finance Agency is preparing to lower the maximum size of mortgages eligible for backing by Fannie Mae and Freddie Mac, although it has not signaled how far it will drop the loan limits.
The policy change aims to facilitate a larger role for private capital in the mortgage market but is likely to face resistance from some critics in Congress and in the real estate industry, who say the move will shrink the pool of eligible home buyers and hold back housing recovery. "It would be counterproductive to make changes to the loan limits before private capital is fully engaged," warns National Association of Realtors President Gary Thomas. The new loan limits would take effect Jan. 1, 2014. The FHFA contends that it does not need congressional approval as long as Fannie Mae and Freddie Mac remain under government control.