OptionC: As long as the borrower is meeting the other aspects of a conforming loan like credit rating, employment history, debt/income ratios and down payment, why does there even need to be a limit?

Not to be demeaning, but I'm going to assume that you really don't understand what the article is referring to.  These are not bank loans but rather government backed loans which means that certain federal regulations have be met in order to qualify for them.  Fannie and Freddie were both founded with the intent of ensuring that affordable interest rate home loans would always be available for the average citizen.  They were not created with the intent of being used to back, say, a luxury home, office complex, or a REIT.  Since the government covers the loan in the event of default, that effectively puts the ultimate liability of the loan on taxpayer (i.e. you, personally, assuming you are US citizen) so the laws are in place to, arguably, protect taxpayer liability but also prevent abuse by people or companies who don't need them.  If you are talking about a normal mortgage, then I would agree with your sentiment, but the mortgages being referenced in the article are not.  They are effectively special purpose loans and the limits surrounding them are what define their special purpose.

/Yes, I know Fannie and Freddie have been privatized and that creates some ambiguity surrounding ultimate liability, but its a complex point and not an issue worth getting into here.


As an aside, the quote below confirms what a few other's have said in that any limit increase will always result in the highest limit ever.  Subby didn't read their own effing article or they didn't understand it.  Either way, dumbass confirmed.

"It is FHFA's practice not to allow loan limits to decrease. When home prices decline, loan limits remain the same as the prior year until house price declines have been "made up." For example, following the housing crash, the baseline loan limit value did not change in 2007 and remained at the same level until 2017, when they increased again."

OptionC: davypi: Not to be demeaning, but I'm going to assume that you really don't understand what the article is referring to.

I understand quite well what a conforming mortgage is, I just wonder why they bother having an upper limit on value (or at least why it is so low).  Even with the extended limits for high priced areas, virtually every house in Silicon Valley is going to be a jumbo mortgage which seems kind of silly.

Well, again, the point of these company's existence in the first place is to provide affordable housing to the general public.  I don't particularly feel like my tax money ought to be used as backup collateral for somebody who wants to buy a beach house so they can lease it out on AirBNB.  We're supposed to be funding affordable housing, not using it as venture capital.  So, my question to you would be, if you remove the limit, how are you then going to define the use of these loans in a way that keeps it reasonably restricted towards its original intent?  Honestly, I'm not sure what prices are like in the Valley and as bonkers as the market is right now I wouldn't really doubt that this is a legitimate concern.  As such, I would not be opposed to an argument that the current method we have for establishing a cap is outdated, but I'm not sure I would buy in to absolute cap removal, at least not without a very well defined loan usage policy.