Let’s see. $417K to $709K. A 70% increase in one fell swoop. Hmmmm. I don’t know but that seems like a pretty big stretch.
But let’s assume that he’s right (and he probably isn’t). Even then, that doesn’t help the non-Freddie/Fannie secondary market one bit. These folks don’t really care what the conforming limit is, per se, when pricing product; they care about how they think the loan is going to perform. Period. Some artificial distinction made between conforming and non-conforming is largely irrelevant.
Where raising the limit could help a little bit is that more product could be purchased by Fannie/Freddie. But both of these GSAs are really highly levered as it is. So there’s a limited amount of new product that they can hold on their balance sheets. At the end of the day, the real issue is with the secondary market away from Fannie/Freddie. If it doesn’t come back, then tinkering with the conforming loan amount, while marginally helpful to the housing market, is just rearranging the deck chairs.
Ultimately, people have to be able to afford their mortgages at a “true” market rate of interest. Tinkering around with the conforming limit doesn’t really address the issue.
