ABA supports the Federal Housing Finance Agency’s use of a house price index that would eventually lead to higher conforming loan limits for mortgages that Fannie Mae and Freddie Mac will purchase, ABA said in a comment letter yesterday. Until broader reforms are made to the housing finance market, Fannie and Freddie remain key funding sources for banks making mortgage loans, and ABA believes that their loan limits must reflect the current and improving state of the housing market.
In the long run, however, ABA said that the conforming loan limits are too high. Given post-crisis house price declines, the average mortgage loan amounted to $294,000 in March 2014 — well below the GSEs’ $417,000 and $625,500 in high-cost areas. “As Congress works to develop a consensus on broad reforms, ABA has advocated lowering the conforming loan limits,” the association said. “Such high limits have made it possible for the GSEs to hold too large a share of the housing finance market.” ABA acknowledged that statute prevents the conforming loan limits from being lowered.