The Community Bankers Association of Illinois called on the Federal Housing Finance Agency last week to raise the loan limits for the Chicagoland Metropolitan Statistical Area, saying the current loan limit of $417,000 has negatively impacted the metro area’s housing market.
In December, the FHFA requested public comment on a plan to gradually reduce the maximum size of loans purchasable by government-sponsored mortgage giants Fannie Mae and Freddie Mac as part of an effort to reduce their footprint in the housing finance market.
“The loan purchase limits, which FHFA would set under its authority as conservator of Fannie Mae and Freddie Mac, would modestly reduce Fannie Mae’s and Freddie Mac’s business at the high end of the market, invite private capital to re-enter the market and limit taxpayer exposure to losses,” the FHFA said in its request for comment late last year.
Conforming loan limits are calculated using MSA median home values. If a county located in the data set has a high median home value, the MSA qualifies for a higher loan limit. The CBAI pointed to Chicago’s “large heterogeneous counties,” saying that despite a large number of high-cost owner-occupied units, the area does not qualify for a higher loan limit.
Data provided in the letter to the FHFA showed the number of owner-occupied high-cost units in Chicago is greater than in other areas, such as Buffalo, N.Y.; Cleveland, Ohio; Detroit, Mich.; and Milwaukee, Wis., but all of the areas have a $417,000 conforming loan limit.
“Chicago’s importance to the nation’s housing system and the continued recovery from the housing crisis in unquestionable,” the letter said. “This inequity negatively impacts home sales in the Chicago MSA. Chicago homebuyers seeking to purchase homes valued above $417,000 must obtain jumbo mortgages, which are more difficult to obtain and carry higher interest rates and fees.”
The CBAI urged the FHFA to “immediately use its discretionary authority” to implement higher loan limits for the Chicago MSA.
“Planned future efforts to decrease loan limits, to reduce to the government footprint in the mortgage market, when combined with the inequity of the current one-size-fits-all high-cost county rule will result in the worst possible outcome for the Chicago area—future lower limits on a lower base—and will continue to negatively impact the growth and prosperity of the entire region,” the CBAI said in the letter.