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Fannie Mae, Freddie Mac To Keep Funding Higher Mortgages For Now

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U.S. regulators are extending Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s backing for higher priced mortgages—at least for now. CNBC’s Diana Olick reports that the extension will go at least through the middle of next year.

Fannie Mae, Freddie Mac To Keep Funding Higher Mortgages For Now

FHFA says the timing to phase out Fannie Mae, Freddie Mac not right

President Obama had asked the Federal Housing Finance Agency to start lowering mortgage limits through the two companies by the end of this year. However, FHFA acting director Ed DeMarco says it isn’t the right time to make this change. He told the media that the mortgage industry is busily implementing other regulations which will take effect at the beginning of next year and that those implementations are enough for right now.

The new regulations he spoke of came from the Consumer Financial Protection Bureau. They require lenders to prove that borrowers will be able to pay back a loan. This new regulation is referred to as the Qualified Mortgage Rule, and it starts Jan. 1. Lenders are working to ensure that they will be in compliance with every requirement of that new regulation.

Obama’s push for lower loan limits

The Obama administration has been making efforts to reduce the role the government plays in mortgage lending and to bring private funding back into the industry. One of the ways officials have been trying to do this is by lowering the limits on mortgages offered by Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).

In some expensive areas to live, limits for mortgage backed by the two government sponsored entities were raised from $417,000 to $729,750. At that time, private funds disappeared from the market, and the government ended up funding the market through Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). In 2011, limits were cut to $625,500 for places with high home costs.

The Federal Housing Administration still has a limit of $729,750, but that amount will fall at the end of the year. This should reduce the government’s market share, which has been dropping already because of higher premiums and fees for homeowners’ insurance.

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