OFHEO Director Slams Proposed Loan Limit Increase

January 25, 2008 No Comments »

Not everyone is pleased with the planned move to increase the conforming loan limit, namely the organization that regulates mortgage financiers Fannie Mae and Freddie Mac.

The Office of Federal Housing Enterprise Oversight released a statement on their website from director James B. Lockhart, expressing their disapproval for the hasty move.

“We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform,” said Lockhart.

“To restore confidence in the markets we must ensure that the GSEs’ regulator has all the necessary safety and soundness tools.”

Lockhart had previously mentioned that complete reform would be necessary before looking at a loan limit increase, but it appears that despite his concerns, he is willing to cooperate.

“Yesterday Chairman Dodd talked about moving a GSE reform bill early this year. We are ready to work with him and the Senate Banking Committee,” he added.

“We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit moves through their rigorous new product approval process quickly and has appropriate risk management policies and capital in place,” he concluded.

It should be interesting to see if the OFHEO suggests the purchase of only certain types of jumbo loans, such as those that are fixed mortgages and fully-amortizing.

In related news, analysts expressed concern that a higher conforming loan limit will lead to higher mortgage rates, as a greater supply of loans available for purchase will shrink demand.

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