Search Results

December 06, 2019  

FHFA Prioritizes Big-Picture Approach

Political concerns apparently were behind the decision to raise the loan-size limits of Fannie Mae and Freddie Mac.

Many market professionals were caught off guard by the Nov. 26 move, considering a well-publicized desire by Federal Housing Finance Agency head Mark Calabria to reduce the roles of Fannie and Freddie. But it turns out he was reluctant to pick a fight with Congress, and even doubted his authority to prevent the increases.

When it comes to potential conflicts with lawmakers, the indication is that Calabria sees it as better to lay low while continuing to pursue a broader effort to privatize Fannie and Freddie. “I think freezing or lowering loan limits would touch a nerve with Democrats such as Maxine Waters,” one source said, pointing to the California congresswoman’s status as head of the House Financial Services Committee and her representation of a high-cost state. “Calabria is rattling a lot of cages in D.C., so this might be one he decided to stay away from with Congress.”

Others question whether Calabria believed he had a choice.

An FHFA spokesperson declined to comment, but pointed to a previous statement that cited a Housing and Economic Recovery Act requirement that loan limits be adjusted yearly based on third-quarter readings from the FHFA House Price Index. Calabria also has intimated since his March appointment that he doesn’t have the power to change that process.

That view isn’t shared by all. Housing Policy Council president Ed DeMarco, who headed the FHFA from 2009 to 2014, has maintained that while the agency doesn’t have a say in its role as the regulator of Fannie and Freddie, its position as their conservator gives it the latitude to freeze or even reduce loan limits.

“Freezing the loan limits would make sense, if not lowering them,” he said. “It would help the private-label securitization market reemerge.”

Indeed, the surprise over the loan-limit increases reflects Calabria’s status as an outspoken proponent of privatizing Fannie and Freddie while assigning a larger role in mortgage lending and funding to the private-label market. He and his allies in the Trump Administration are aiming to complete that process by yearend 2023, chiefly through administrative edict.

The loan-limit increase brought the conforming-mortgage cap in most markets for 2020 to $510,400 from $484,350. High-cost areas saw a rise to $765,600 from $726,525. “It would have been nice if [Calabria] didn’t raise the limits. The market would have been happy,” one attorney said. “But he’s probably looking at the bigger picture.”