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Fannie, Freddie looking to increase mortgage limits

By Jeff Lazerson

10/18/18

What I think: I received a motherlode of news you can use from the Mortgage Bankers Convention, which I attended earlier this week in Washington, D.C.

The Federal Housing Finance Agency, which is both the conservator and the regulator for Fannie Mae and Freddie Mac, will likely increase the maximum loan limits for Fannie and Freddie according to Andy Leventis, FHFA’s deputy chief economist.

Each year, FHFA calculates any possible changes to the loan limits via its third quarter, year-over-year home price index or HPI. HPI tracks the average of home prices purchased nationwide by mortgage giants Fan and Fred.

Being coy, Leventis would not provide the exact increase but he did point to the second quarter 2018 HPI as a guide to the third-quarter index. “Second quarter was up around 6 percent relative to the second quarter 2017,” he said.

Separately, third quarter year-over-year data from Irvine based Attom Data Solutions in Irvine show an average price increase of 5.8 percent nationally, according to Daren Blomquist, senior vice president at Attom. The firm incorporates public data and real estate data including other mortgage sales such as FHA, VA and jumbo — not just Fannie and Freddie loans.

Let’s speculate and split the difference between FHFA’s second-quarter number and Attom’s third-quarter number. If FHFA raises the baseline loan limits 5.9 percent, then the new conforming loan limit for Orange, Los Angeles, Riverside and San Bernardino counties goes from its current $453,100 maximum to $479,833. The so-called agency jumbo or agency high balance (which is generally one-quarter-percent higher interest rate) for high-cost areas like Orange and Los Angeles counties also likely will go from $679,650 to $719,749. Nice!

This is important because Fannie and Freddie, generally speaking, have more competitive pricing for mortgage shoppers than having to take out a jumbo loan (anything over the mortgage giants limits).

The FHFA loan increase announcement is expected to be made the last week of November.

FHFA also is rolling out better tools for borrowers with limited English proficiency. Starting with Spanish, the FHFA is creating a collection of translated documents that includes, but is not limited to, loan applications, disclosures, mortgage note, mortgage statement and a glossary of definitions.

The Language Access Multi-Year Plan, soon will be adding Vietnamese, Korean, Chinese and Tagalog translations. Go to fhfa.gov/mortgagetranslations for more information.

Speaking at the opening general session, Former Fed Chair Janet Yellen spoke of the deregulation push. “I’m afraid deregulation could go too far,” she said. Regarding the economy, “Good times to last through 2019.”

It would have been nice (since she was speaking in front of a bunch of mortgage bankers) to acknowledge and sympathize with the industry’s woes. For example, in a separate press briefing, Marina Walsh, MBA’s vice president of industry analysis, research and economics said, “Twenty-seven percent of lenders are losing money now.” Most of the cocktail hour conversations I had with folks had the number of lenders losing money more like 50-60 percent in this current slowdown.

Quote of the convention came from Lakers President Magic Johnson, “There is one team (for the Lakers) to beat. It’s Golden State.”

More convention news to come in next week’s column.