Federal officials are preparing to reduce the maximum size of home-mortgage loans eligible for backing by Fannie Mae and Freddie Mac, a move that is likely to face resistance from some lawmakers in Congress and the real estate industry, the Wall Street Journal reported today. The proposed move is designed to wean the mortgage market off government support and allow the market for non-government-guaranteed mortgages to take a bigger role. But critics argue that any such move will shrink the pool of eligible home buyers, stunting the nation's housing recovery. Currently, Fannie and Freddie Mac can back mortgages that have balances as high as $417,000 in most parts of the country and up to $625,500 in expensive housing markets, including parts of California and New York, and as much as $721,050 in Hawaii. The Federal Housing Finance Agency, which regulates Fannie and Freddie, hasn't announced how far it will drop the loan limits, which would take effect Jan. 1, 2014. But in a statement, the agency said a "gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayers' mortgage-risk exposure…and expanding the role of private capital in mortgage finance."
