Washington, D.C. – The Federal Housing Finance Agency (FHFA) is sending to the Federal Register a request for public input on the implementation of a plan to gradually reduce the maximum size of loans that Fannie Mae and Freddie Mac may purchase.

Setting reduced “loan purchase limits” furthers the goal of contracting the market presence of Fannie Mae and Freddie Mac gradually over time, one of the key objectives of FHFA’s “Strategic Plan for Enterprise Conservatorships.” Reducing the limits is also in line with President Obama’s August 2013 request that FHFA reduce loan limits in order to reduce the government’s footprint in the mortgage market. The loan purchase limits, which FHFA would set under its authority as conservator of Fannie Mae and Freddie Mac, would modestly reduce Fannie Mae’s and Freddie Mac’s business at the high end of the market, invite private capital to re-enter the market, and limit taxpayer exposure to losses.

In areas where the statutory maximum loan limit for one-unit properties is currently $417,000, the plan being contemplated would set the loan purchase limit at $400,000—approximately a four percent reduction. The loan purchase limit would be reduced by the same percentage in other parts of the country, including those areas where current limits are at $625,500. Those loan purchase limits would be set at $600,000.

FHFA has concluded that inviting public input on potential operational and technical issues associated with the planned decrease in loan purchase limits would benefit any final decision. Therefore, before deciding to undertake any modifications, FHFA is seeking public input that will inform its decision-making and ensure any change minimizes market disruptions. FHFA seeks input on the implementation of the proposed limits including whether six months’ advance notice is adequate, whether it is preferable for FHFA to announce a multi-year schedule of decreases, and to what date any future loan purchase limit reductions should be tied.

The contemplated action is a plan and not a final decision. The requested public input will be carefully reviewed before FHFA decides whether and how to proceed with the planned approach to Freddie Mac’s and Fannie Mae’s loan purchase limits. No final decision on loan purchase limits will be made until the comments are reviewed and, in any event, the changes contemplated in this Request for Input will not affect loans originated before October 1, 2014.

The attached document outlines FHFA’s legal authority for decreasing the loan purchase limit; includes an impact analysis of planned reductions; and poses questions regarding implementation that interested parties are invited to answer. Input must be received no later than March 20, 2014 and should be submitted to the Federal Housing Finance Agency, Office of Policy Analysis and Research, 400 7th Street, SW, Ninth Floor, Washington, DC 20024 or via email to: loanlimitinput@FHFA.gov.