The Federal Housing Finance Agency (FHFA) has denied rumors that it plans to lower the conforming loan limit. Director Bill Pulte stated that the agency has no comment on the matter, which has sparked speculation among policy experts.
According to Eric Hagen, managing director at BTIG, a hypothetical reduction in the conforming loan limit would help shrink the GSEs (Government Sponsored Enterprises) and align with eventual privatization. The idea also makes sense from a populist political standpoint, as it would reduce the GSEs’ footprint.
The FHFA uses its House Price Index to set conforming loan limits, which are dictated by the Housing and Economic Recovery Act of 2008. However, the law does not discuss whether the agency can adjust the limit for other reasons.
Policy experts weigh in on potential implications of a CLL reduction, including boosting the private-label securities market and benefiting large lenders that have financing channels for non-conforming loans. Some also speculate that the GSEs might charge higher guarantee-fees or end the backing of cash-out refinances.
Director Bill Pulte’s statement suggests that any changes to the conforming loan limit would require significant effort, as part of the government’s efforts to align with President Trump’s agenda.
Source: https://www.nationalmortgagenews.com/news/experts-mull-fhfas-hypothetical-conforming-loan-limit-cut