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October 31, 2012

Home Loan Limits with Fannie Mae

Category: Fannie Mae News,Home Loan News,Published Articles – admin – 10:23 am

Money News published a good report on conventional loan amount limits with respect to Fannie Mae. Both government sponsored companies are looking to protect taxpayers as many new mortgage lenders have engaged to do business with them. This is also helping many of the largest banks realize more revenues, but Fannie Mae has been forced to set 2013 loan limits on conforming mortgages at a conservative level to minimize risks. It is no secret that the Federal Reserve has committed a significant amount of money and resources in an effort to stimulate the housing sector in the United States.

Will 2013 Loan Limits Stay High on Fannie Mae Mortgage Products?

Fannie Mae, has begun limiting how many mortgages annually it will guarantee or buy from certain firms. Limited competition in the industry and a lack of capacity to meet demand is helping JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon get “very high” home loan margins. That’s frustrating central bankers such as William Dudley, the Federal Reserve Bank of New York president, who said this month that rates on 30-year mortgage refinancing were higher than they could be after the Federal Reserve said it plans to acquire $40 billion of mortgage securities a month. “More direct access to Fannie would end up in more mortgage companies getting a better price and consumers would benefit,” said John Robbins, head of Bexil American Mortgage Inc., who founded two lenders later sold to banks now part of JPMorgan and Wells Fargo & Co. “The problem is, if you’re Fannie you just can’t let all these companies have unlimited access. You don’t want to give a high-speed, temperamental race car to someone who just got a driver’s license.”

Fannie Mae and Freddie Mac were seized by the government that year and have received $137 billion of aid since then, enabling them to finance about two-thirds of new loans. Even with steps to reduce their dominance, including increases to how much they charge for mortgage guarantees, there are few signs of progress. “Reform is not going to happen next year and probably not until 2015,” said Isaac Boltansky, a Washington-based policy analyst for Compass Point Research & Trading LLC.
The future of Fannie Mae and Freddie Mac has been on the backburner this year amid a presidential election and a recovery in housing, including higher prices, home sales and construction. That’s being driven in part by the Fed’s policy of buying mortgage bonds to push down borrowing costs. The Obama administration also adjusted rules to allow more borrowers to tap record-low rates. Refinancing applications soared to a three-year high with 30-year mortgages reaching 3.36 percent this month, straining staffs of lenders, which held rates higher than they could offer in part to reduce demand.

Fed Governor Elizabeth Duke said this month the economy needs more small lenders and that new regulation may drive more out of business. These firms historically have been willing to give more consideration to good borrowers with unusual situations that bigger lenders don’t want to deal with, she said. “You need to make sure you can still make the irregular loan, the one that doesn’t fit exactly in a box,” Duke said.

Regulators are writing rules such as national servicing guidelines that will be relatively more costly for smaller lenders to comply with, said Robert Bostrom, who served as general counsel for Freddie Mac for five years through 2011.“There’s just not enough capacity in the marketplace,” said Bostrom, who is now at law firm SNR Denton. “And we all know who’s going to end up paying for it: the consumer.” Read more: Fannie’s Mortgage Limits Help Banks 

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