Comment Detail

Comment

March 13, 2014

Federal Housing Finance Agency (OPAR)
Constitution Center
400 7th Street SW, 9th Floor
Washington, DC 20024
loanpurchaselimitinput@fhfa.gov

RE: [No. 2013-N-18]

To Whom it May Concern:

I am writing on behalf of the San Mateo County (CA) Association of REALTORS® to provide input on the above referenced notice entitled, “Fannie Mae and Freddie Mac Loan Purchase Limits: Request for Public Input on Implementation Issues.” The proposal is to lower the conforming loan limits by approximately 4%, bringing the floor from $417,000 to $400,000 and cap from $625,500 to $600,000.

We urge you NOT to change the existing loan limits, as it has been critical in restoring stability to local housing markets across California – and in particular, San Mateo County.

Though there has been nominal improvement in the housing market, purchasing a home remains a challenge for many potential homeowners due to the restrictive availability of credit, particularly if available loans cannot be purchased or insured by the government sponsored entities (GSEs) or FHA.

Many borrowers in areas affected by the contemplated reduction in loan limits (San Mateo County being a prime example as we have one of the most expensive housing markets in the United States) rely on the liquidity that the GSEs provide. These same borrowers will have difficulty qualifying under the tight credit standards currently required by private lenders, including the 20% down payment requirement that is a minimum for most lenders. Outside of the GSEs and FHA, credit remains limited and available only to the wealthiest borrowers with pristine credit. These conditions leave the American dream of home ownership out of reach for many families.

As you know, credit losses on mortgages are the result of expected default rates and the loss rates given default, i.e. loss severity. The loss rate, in turn, depends on the rates of three competing outcomes after a loan goes into default: resolution, prepayment and the foreclosure sale, as well as the loss severity experienced for each of these three competing outcomes.

The FHFA proposal does not even attempt to measure the impact of state statutes (and doesn’t address all other state laws that may impact losses) on default rates, resolution rates, or prepayment rates, but only considers the impact of the state laws on loss severity for foreclosed properties. This is a sadly inconsistent approach.

In the Federal Register announcement on December 23rd, FHFA noted that reducing the loan purchase limits is consistent with its legal authorities as conservator provided under the Housing and Economic Recovery Act of 2008 (HERA). Seriously?

SAMCAR would argue that by making a decision to lower the purchase limit, FHFA would be superseding congressional intent under that same law which:
1. Established the maximum loan limit for loans purchased by the GSEs; and
2. Made it a principal duty of the Director to ensure that the GSEs serve as a reliable source of liquidity and funding for housing finance and community investment.

Maintaining a steady, nationwide floor for the GSE loan limits contributes to stabilizing housing prices, the stability of the housing finance system, and consumer confidence. It’s a basic of economics: Continued downward pressure on the limits adds to the uncertainty in mortgage markets.

It’s crucial that the federal government act to maintain market stability, NOT add disruptive and unnecessary changes at this critical time in the nation’s economic recovery. While the housing market continues to experience a nascent recovery, data reflects that it remains fragile. Based on market conditions and the terms of the Housing and Economic Recovery Act of 2008, we urge you NOT to take steps such as reducing limits that will only restrict consumer access to mortgage credit.

Respectfully,
Paul Stewart
Government Affairs Director
San Mateo County Association of REALTORS®
(650) 696-8209 | paul@samcar.org
850 Woodside Way, San Mateo, CA 94401