Housing Markets About To Get Squeezed

A spokesperson for the FHFA says that the agency shares the administrations view that a gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayers mortgage risk exposure, shrinking the footprint of Fannie Mae and Freddie Mac in the marketplace, and expanding the role of private capital in mortgage finance. But analysts caution that lowering their caps could have a domino effect on home sales. Many borrowers who use the maximum dollar amount of Fannie Mae and Freddie Mac loans tend to live in high-cost areas and rely on these mortgages to buy homes. If theyre unable to get financing, given that the private mortgage market visit is more selective, sales could stall and prices as a result may drop, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla. This will be a real eye-opener, he says.
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