Fannie Mae Statement on Conforming Loan Limit Increase

Now that President Bush has signed the fiscal stimulus legislation into law, one of the more immediate impacts will be renewed availability of low-cost jumbo home mortgages.

Here is Fannie Mae's initial statement on the higher mortgage limit from yesterday:

The temporary increase in the GSE loan limit that President Bush signed into law today will help bring stability, liquidity and affordability to an important part of the housing finance system. Fannie Mae welcomes this opportunity to help support the housing market in high-cost areas, and we are working with our regulators and our lender partners to implement the change as quickly as possible.

No specific target date for availability, but since there is a lot of profit opportunity you know that all the players want to get the money machine cranking again. This legislation was essentially a license for the home mortgage GSEs to print money. Whether we see something happen with 30 days is debatable, but I would expect that within two months Fannie Mae and Freddie Mac will have absorbed an interesting amount of jumbo mortgages. The initial impact will be for banks to sell mortgages that have been sitting on their balance sheet to the GSEs, thus freeing up capital for other uses. This will significantly enhance bank liquidity.

To be clear, this change was an extremely important piece of legislation.

Even more, it is a real kick in the teeth to Wall Street, having the government in the form of the GSEs bail out the big banks when just a few years ago Wall Street was hollering that the GSEs "posed a systemic threat to the financial system." I knew back then that it was all a lie and that Wall Street just wanted "a piece of the action." The GSEs were never a systemic threat. It was and always will be Wall Street greed that is the only true systemic threat.

-- Jack Krupansky