Welcome to the big leagues: Increasing loan limits fuel industry competition

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Like clockwork for the industry, every year for the last four years, the Federal Housing Finance Agency increased Fannie Mae’s and Freddie Mac’s conforming loan limits at the start of the new year.

Around the same time, the Federal Housing Administration also announced changes to its loan limits, which increased for nearly all of the country heading into 2020.

Despite the one-month scramble this creates for lenders to update their systems, adjust their marketing and educate their team, the changes to loans limits aren’t pulled out of thin air like a twisted magic trick to surprise the industry. It’s a highly calculated and predictable process.

Mortgage Bankers Association Senior Vice President of Residential Policy and Member Engagement Pete Mills commented on the importance of the way loan limit changes are handled, stating that “having it formulaic and having it pretty specific is an important signal to the market and gives the market certainty.”

“It’s speculation, but it’s not uncertainty,” said Mills. “The industry can speculate about how high they’re going to go and what the new loan limits might be. But it’s not uncertainty.”

This certainty also ushers in the opportunity for lenders to achieve one of their biggest goals — grow market share.

Leveling the playing field

For nearly a century and a half, independent mortgage banks (IMBs) have served an important role in the housing finance ecosystem, and yet, in total number, they only make up a small percentage of the market when it comes to the total number of companies.

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The post Welcome to the big leagues: Increasing loan limits fuel industry competition appeared first on HousingWire.

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