The idea that the GSE’s exist to support low-income housing is archaic, it hasn’t been true for at least 20 years. Crikey the conforming limit was around $250k back then, and it’s been $417k for many years. In most of the country those numbers bought a lot of house at the time they were set. The GSE’s transitioned from low-income housing to facilitating liquidity a long time ago, and everyone knows it. It’s about time they updated their web site.

IMOHO the limits should be set in a similar manner as FHA based on median housing prices in a region. Say 150% of the median price. This would drop the limits in many areas and raise them in others. This would still cover upwards of 85% of the housing in America.

To mollify those who fear that Fannie and Freddie are taking on too many risks, Sen. Dodd promised to push for completion of long-stalled legislation that would give their regulator more power.

Not everyone was reassured. "There is consternation from a growing minority on the Republican side as to why we’re doing this," one senior Republican aide said. "Why are we increasing the risk to these organizations that have had problems historically to the benefit of people who don’t really need it?"

Good question.

Even the best of pilots can’t land safely under those conditions, and we don’t have the best of pilots.

[Igor sums it up nicely: titanic]

I was pleased that Olick decided to go with the FNM story- their website shows rather clearly the shift in their focus, in spite of their denials.

The shift is an important one. If the GSEs are about affordable housing, they won’t worry about a lack of financing in the jumbo range- they just let prices fall down to the conforming limit, and a whole bunch of housing becomes more affordable. However, if their mission is to keep lenders and the housing industry afloat, then raising the limits to prop up prices makes sense. I think we deserve to know what it is they are really trying to do.

Good job Twist, congratulations are in order. I believe I heard Diana Olick mention Housingdoom on TV and gave props to this exact story. First they ignore you, then they ridicule you, then they fight you……

Thanks for fighting the good fight for sensible American’s.

“More Risk for Fannie, Freddie? New Stimulus Package Promises to Change Standards on Loans”, by James R. Hagerty and Michael Corkery, Wall Street Journal, January 25, 2008.

With defaults rising, investors lately have shunned nearly all mortgages not guaranteed by Fannie Mae and Freddie Mac. They assume that the two companies, which are private but were created by Congress, would get a bailout in a crisis.

John as always is a modest [if low profile] member of team.

Thank you John!

Great dig!

For years I’ve been reading paranoid conspiracy theories on the housing- / econo- blogs that this is all about the banks, hedgies, etc. and the actual homeowners can pound sand. So now that the bubble has burst, Fannie has made it official.

Indeed, this is a significant find, and you and your team are to be congratulated.

There was a great article in the San Francisco Chronicle recently that was talking about the difficulties people were having qualifying in the upper end.

They said that a couple of years ago, you could qualify for a $1M loan with an income of $90K. However, with the wonky financing disappearing and standards tightening, it now takes an income of $175K. This has greatly limited the pool of buyers.

Yeah a point or two doesn’t make a huge difference for rich folks, but the luxury market boomed because lots of folks who weren’t rich were buying into that market.

Those are the folks they are trying to keep in the game, but in the current environment, I don’t see that happening.