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In a letter to the Federal Housing Finance Agency (FHFA), the National Association of Federal Credit Unions (NAFCU) is urging the FHFA to keep the conforming loan limit at its current baseline rate of $417,000 and not let the limit drop any lower.
"While the agency considers implementing this minor economic adjustment to the HPI, NAFCU urges the FHFA to not decrease the conforming loan limit below the current baseline rate of $417,000," Kavitha Subramanian, regulatory affairs counsel for the NAFCU wrote.
The NAFCU also noted that this change could interrupt a still-recovering housing market.
"NAFCU believes the current 2015 limits should be kept in effect in order to avoid a disruption to the national housing market that is still recovering," Subramanian said. "NAFCU’s economic research team has concluded that while home sales are widely expected to improve in 2015 as the labor market improves, the exit of many investors from the market and the lack of first-time homebuyers represent two issues of concern for the coming year. Sudden or drastic changes to the conforming loan limit rate for the Enterprises could hamper this recovery.
Under the Housing and Economic Recovery Act of 2008 (HERA), the FHFA is required to "establish and maintain" a house price index (HPI) for adjusting the conforming loan limits of the Fannie Mae and Freddie Mac.
"Currently, in 2015 the conforming loan limit is set at $417,000 for one-unit properties throughout most of the nation," Subramanian noted. "The FHFA intends to use the “expanded-data” HPI—an index the agency publishes quarterly—to adjust the conforming loan limits for the Enterprises in the future."
The NAFCU and its members also requested that the FHFA consider how using the "expanded-data" HPI will affect "high-cost" loan areas where the local median home value is above the baseline loan limit.
"In considering this proposal, the FHFA must ensure that credit unions are able to provide mortgages to members in communities where home prices are above the national average by protecting the credit union’s access to the secondary mortgage market with reasonable conforming loan limits in effect," the letter stated.
Subramanian concludes that the NAFCU stands firm that market stability preservation among the Enterprises is necessary for a healthy secondary mortgage market for credit unions.
"Our nation’s credit unions need safe, affordable and fair access to the secondary mortgage market in order to effectively meet the lending needs of their 100 million members in communities across the country," Subramanian said. "Although the housing market continues to heal as a result of current job growth, wage gains and low-interest rates, NAFCU and our members caution the FHFA to remain cognizant that the U.S. housing market is still vulnerable to any drastic market changes. NAFCU hopes that FHFA will to continue to closely monitor economic indicators in the housing markets prior to enacting any additional changes to conforming loan limits for the Enterprises."
