FHFA Announces Maximum Conforming Loan Limits for 2018

Fannie Mae and Freddie Mac Baseline Limit Will Increase to $453,100

FOR IMMEDIATE RELEASE 11/28/2017

Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2018. In most of the U.S., the 2018 maximum conforming loan limit for one-unit properties will be $453,100, an increase from $424,100 in 2017.

Baseline limit

The Housing and Economic Recovery Act (HERA) requires that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price. Earlier today, FHFA published its third quarter 2017 House Price Index (HPI) report, which includes estimates for the increase in the average U.S. home value over the last four quarters. According to FHFA’s seasonally adjusted, expanded-data HPI, house prices increased 6.8 percent, on average, between the third quarters of 2016 and 2017. Therefore, the baseline maximum conforming loan limit in 2018 will increase by the same percentage. [MORE: Go to link here.]

Background. It wasn’t that long ago, circa 2010, housing advocates were lobbying for tougher new laws to rein in the abuses of the easy money years. Now, thanks to Dodd-Frank and its henchman, the CFPB, some folks are saying the regulators have gone too far.

Today’s Regulatory Atmosphere. In a recent Housingwire article (MBA’s Stevens: Today’s housing policies fail American homeowners), the President of the Mortgage Bankers Association (“MBA”) told of packed house of industry members, that the current regulatory culture was “broken.”

“…David Stevens, the president and chief executive officer of the Mortgage Bankers Association, spoke with passion as he told the attendees of the MBA’s National Secondary Market Conference that today’s housing policies are “failing the American homeowner.”

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‘Today the American Dream is in the penalty box, and the Justice Department and other enforcement agencies appear to be in the driver’s seat when it comes to the nation’s housing policy. Everyone working in the mortgage business feels like there is a giant target on their back,’ Stevens told the crowd.”

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“And the fact is consumers and the housing market would all be better served if the tone in D.C. changed,” Stevens continued. “The negative rhetoric and the enforcement environment are hurting everyone – homebuyers, lenders and the stewards of the nation’s economy. Housing policy is failing today.”

“One area where Stevens sees a negative environment being created by regulators and legislators is the mortgage rate comparison tool created by the Consumer Financial Protection Bureau.”

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“Today’s environment is not encouraging credit expansion,” Stevens said. ‘It’s forcing lenders to be overly conservative – ultimately failing entry-level homeowners on every front.’”

According to the Housingwire article, Mr. Stevens had three steps for improvement [the follow comments have been condensed]:

First, Stevens said the dialogue must change. “We’re operating in the safest, soundest lending environment in decades. Consumers should feel confident in applying for loans and purchasing homes,” Stevens said.

“Policymakers should champion this environment and do a victory lap letting consumers know they are well protected and that they can trust the system,” Stevens said. “The dialogue of distrust must end. Regulators should understand the power that their message has over the mortgage market and just how their messages influence behavior.”

The second change that Stevens called for is adjustment to be made to the current lending rules.

Stevens also said that the Qualified Mortgage rule itself doesn’t work as written and needs to be changed.

“The only reason QM is working today is because of the ‘GSE patch,’[1] without which we would be in a world of trouble. The hardwired 43% debt-to-income ratio is too high for some borrowers, and too low for others,” Steven said.

“Non-QM/non-agency loans are primarily going to the wealthier buyers. There is strength at the top end of the market for well-heeled borrowers seeking jumbo loans, but credit remains tight for first-time borrowers who often get lower-balance loans,” Stevens said. “This directly translates into strength at the high end of the market, while the entry-level buyers in most communities still lag behind.

Third, Stevens said that the questions surrounding the secondary market need to be resolved.

Stevens said that last week’s update into the single mortgage-backed security that is to be issued by both Fannie Mae and Freddie Mac is a step in the right direction.

“The single security will lead to more liquidity,” Stevens said. “The single security will lead to more confidence, better and more transparent data. Upfront risk share will lead to a broader risk share model that encourages more competition and brings more private capital back to the market.”

Conclusion. Mr. Stevens’ comments deserve consideration. In effect, he is saying that if the financing system is to work for everyone, the rules must be realistic. Touting QM as a great idea, but diluting it by a “patch” which makes it unrealistic and unfair, gives the CFPB bragging rights for coming up with the wrong solution.

However, Mr. Stevens ignores an issue he probably could not have addressed had he wanted to: The bureaucrats at the CFPB are not in the business of getting along. They need to sow fear and distrust in consumers – otherwise their regulatory raison d’etre disappears. So if they are to keep growing, and overreaching – if you will – they need a boogeyman, and the financial services industry fits that bill in spades.

If things are to change, and perhaps they will, it needs to come legislatively. The CFPB needs to be reorganized, downsized, and declawed. There are those in Congress who are beginning to do just that. More about this in another post. ~PCQ

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[1] Quoting the Urban Institute in another Housingwire article (Urban Institute: Qualified Mortgage impact overblown) the “patch” is a result of the a very large QM exception that: “…allows the GSEs and government agencies such as the Federal Housing Administration to operate under their own standards for seven years or, in the case of the GSEs, when they exit conservatorship, whichever is sooner.” [Italics Mine.] Thus, the high lending bar imposed by QM for residential mortgages, is largely diluted. As Mr. Stevens notes, “The only reason QM is working today is because of the ‘GSE patch.”

Portland-Metro’s 2014 RMLS™ stats bested 2013’s numbers in all metrics:

New listings (37,654) were up 5.0%;
Pending sales (28,220) were up 4.3%;
Closed sales (27,752) were up 3.6%;
Average price ($333,000),was up 7.2%;
Median sale price ($285,500) was up 7.7%;
Average market time dropped from 83 days for 2013 to 70 for 2014, reduction 15.5%;
Inventory in Months[1] began at 4.1 and ended at 2.3.[2]

Continue reading “2014 Portland-Metro Sales Stats: Good News Except For Inventory – What’s Up?”

“…the Obama administration may represent “Peak Left” in American politics, and what we are getting from the left these days is a mix of bewilderment and anger as it realizes that this is as good as it gets. America is unlikely to go farther to the left than it went in the wake of the Iraq War and the financial crash, and while that wasn’t anywhere near enough of a shift for left-leaning Democrats, the country has already moved on.” ~Walter Russell Mead writing online for the American Interest, Dec. 19 [as quoted in the Wall Street Journal’s Notable & Quotable: ‘Peak Left’ for Democrats]

Fannie and Freddie [collectively “the GSEs”[1]] are the two major players in the secondary mortgage market, whose role is to purchase qualifying residential loans made by banks to homebuyers. In that way, the banks get money back to make more and more residential loans. Continue reading “Querin Law: Fannie, Freddie And The Future (Part Two)”

While Fannie Mae and Freddie Mac, the two GSEs[1] who’ve received the most attention of late – and much of it bad, after being taken over by the feds in October 2008 – their forgotten little sister, Ginnie Mae,[2] has been quietly growing into a strong young woman – metaphorically speaking. Continue reading “Ginnie Mae – The Forgotten Sister”

Wall Street Journal (May 8, 2014 by, Nick Timiraos, “5 Takeaways on Fannie, Freddie Earnings” ): “Mortgage giants Fannie Mae and Freddie Mac are sending $10.2 billion to the U.S. Treasury after reporting combined first-quarter profits of $9.3 billion. But Thursday’s earnings reports hinted at a possible cooling off in the profits of both companies, which have benefited from large one-time gains over the past several quarters. They also suggested a modestly softer housing demand.” Continue reading “Fannie, Freddie, And The Future”

AND THE AWARD GOES TO… [complimentary drum roll here] Jason Furman and James Stock! [Hereinafter collectively referred to as “J&J.”] Both economists,[1] apparently shilling for the White House, are calling for the dismemberment of Fannie and Freddie, the government sponsored enterprises, or “GSEs,” with something – anything – else. They have recently co-authored a puff piece [“The Moment is Right for Housing Reform”] that managed to make it onto the Wall Street Journal opinion page, mercifully “below the fold.”

Both gentlemen appear to have all the right credentials to be comfortably ensconced in the ivory towers of Ivy League academia. But for all their whiz-bang credentials in economics and statistics [here], one would think this article would contain a little more meat and a little less mush. In fact, the article is so packed with political pablum it ought to carry a warning against reading it without first putting on a bib. The piece appears to be directed to those folks in the audience who nod knowingly, but know nothing. In other words, J&J’s intent is not to inform, but to influence. To its credit, the article appears to comply with the federal mandates set forth in the “No Idiot Left Behind” learning program for useless information. Congratulations guys!

Continue reading “Nuts and Dolts: White House Puff Piece On “Housing Reform””

Ludd·ite – noun \ˈlə-ˌdīt\: one of a group of early 19th century English workmen destroying laborsaving machinery as a protest; broadly : one who is opposed to especially technological change Luddite adjective. http://www.merriam-webster.com/dictionary/luddite

If the shoe fits…. Hmmm. This sounds vaguely familiar today. As a protest, one destroys the very thing upon which they have come to depend. I note that the dictionary says the term can be used as an adjective. This suggests to me that in today’s parlance, it is primarily descriptive. I sense that calling someone a “Luddite” is not a ringing endorsement of their common sense. Continue reading “Congressional Luddites Seek to Dismantle Fannie and Freddie (Part One)”

It’s a New Year! Time to look back from whence we came, and look forward to 2014. ~PCQ

From Infant to Toddler. The Q-Law website site is now four years old. While still a toddler, it now has developed the features and personality of its father – satirical, acerbic, outspoken, contentious, caustic, etc., etc. I couldn’t be a prouder parent! Continue reading “Q-Law Mission Statement: 2014”

“We supported former Federal Reserve Chairman Paul Volcker’s simple idea: Don’t let federally insured banks gamble in the securities markets. Taxpayers shouldn’t be forced to stand behind Wall Street trading desks. What we can’t support is the “Volcker Rule” that was first distorted in the 2010 Dodd-Frank law and has now been grinded and twisted into 71 pages of text plus 882 more pages of explanation after three years of agency sausage-making.” ~ December 11, 2013 Wall Street Journal Opinion: ‘The Volcker Ambiguity’ Continue reading “The Volcker Rule: How Complexity Kills Good Ideas”