Real estate industry groups are welcoming today’s announcement by the federal regulator that oversees Fannie Mae and Freddie Mac that it won’t reduce the $417,000 conforming loan limit that’s the ceiling for the mortgage giants in most markets.

The Federal Housing Finance Agency’s acting director, Edward DeMarco, was said to be considering lowering the conforming loan limit to take into account the drop in home prices seen in many markets during the real estate bust.

The conforming loan limit is adjusted upward when prices rise, but has never been adjusted downward. Finance and economics blogger Bill McBride has estimated that the national conforming loan limit would be around $360,000 if it had been allowed to come down with home prices during the downturn.

The National Association of Realtors welcomed today’s announcement, saying that lowering the ceiling on loans eligible for backing by the government-sponsored enterprises “would increase costs for consumers and reduce their access to conventional mortgages.”

In high-cost markets, including parts of California and New York, Fannie and Freddie will continue to be able to purchase and guarantee mortgages on single-family homes of up to $625,500.

In a statement, the California Association of Realtors said that, working with NAR, the Realtor groups “aggressively fought to prevent a reduction in the loan limits” because lowering them “would have reversed the housing recovery.” Source: fhfa.gov

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