Lawmakers push back against housing market pinch

A bipartisan group of House lawmakers representing pricey housing markets is pushing back against a regulator effort to trim the government’s presence in housing.

The group of 35 lawmakers wrote to the Federal Housing Finance Agency Thursday, arguing the push to lower the size of mortgages the government would guarantee is “arbitrary” and should be avoided.

The members largely hail from pricey districts in and around cities in New York, California, Massachusetts and the District of Columbia. The effort was helmed by Rep. Carolyn Maloney (D-N.Y.), who represents a pricey portion of Manhattan.

She argued that lowering the conforming loan limit, which dictates what mortgages Fannie Mae and Freddie Mac can guarantee, could pinch middle-class borrowers in high-price markets, at a time when credit can still be tough to come by without a sterling credit score.

In December, the FHFA, which oversees Fannie and Freddie, proposed a 4 percent reduction in the loan limit, which would drop the size of a mortgage that can receive a government backstop to $400,000 from $417,000, and $600,000 from $625,500 in high-cost markets.

The push is an effort by the regulator to reduce the outsized role Fannie and Freddie play in the housing market, as the two government-sponsored enterprises guarantee the vast majority of mortgages created currently.

Lawmakers in both parties, as well as the White House, have said the current arrangement of the housing market is unsustainable, and have pushed to overhaul the market. Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Sen. Mike Crapo (R-Idaho), the top Republican on the panel, recently unveiled their overhaul package, and hope to advance it in short order.

But the lawmakers signing on to Thursday’s letter said it should not fall to the FHFA to make that decision, and demanded Congress be given a say in the matter.

The letter carried an additional wrinkle in that the critique was sent by lawmakers to one of their former colleagues. FHFA Director Mel Watt previously served as a longtime Democratic congressman from North Carolina, and served alongside several of the letter’s signees on the House Financial Services Committee.

The FHFA’s push to lower the limits began before Watt took the job; he was sworn in in January.