Regulator’s talk of reduced Fannie and Freddie loan limits could not come at a worse time

Real estate industry warns of credit crunch if thousands of homebuyers are moved into 'jumbo' territory

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Worried about a drop in the Fannie-Freddie maximum loan limits that could hurt home sales because buyers no longer can afford financing? Based on public statements from the conservator of the two companies -- Ed DeMarco, acting director of the Federal Housing Finance Agency -- you have good reason. But based on what’s been taking shape on Capitol Hill and elsewhere in Washington, maybe you shouldn’t worry too much. When the FHFA announced last month that it is contemplating cutting conventional loan ceilings nationwide from the current $417,000 ($625,000 in high-cost areas), real estate, mortgage and homebuilding lobbies were horrified. Reducing loan limits would squeeze thousands of homebuyers out of conventional financing opportunities, they said, forcing them to find money in the much more restrictive nonconforming “jumbo” marketplace, where required down payments tend to be much higher, credit must be pristine, and where people with large asset resources and high n...