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CBAI Calls on FHFA to Increase Loan Limits for the Chicago MSA

March 18, 2014

In response to the Federal Housing Finance Agency (FHFA) request for input on loan purchase limits, CBAI drew the Agency’s attention to the unique nature of the Chicago-Naperville-Elgin, IL-IN-WI Metropolitan Statistical Area (MSA) and how the one-size-fits-all “high-cost county rule” (HCCR) has resulted in Chicago having a $417,000 conforming loan limit, which is an inequity that has negatively impacted the Chicago-area housing market.

Conforming loan limits are calculated based on MSA median home value. MSAs are composed of different counties. If one of the counties has a high enough median home value the entire MSA qualifies for the higher loan limit. Many MSAs contain only one or two small homogeneous wealthy counties that increase the loan limit for the entire MSA. The Chicago area has large heterogeneous counties (Chicago’s Cook County for example is the 2nd most populous county in the nation) and therefore does not qualify for a higher loan limit despite having a large number of high-cost owner-occupied units. Given the similarity of the Chicago housing market to many other high-cost metropolitan housing markets, CBAI requested the FHFA immediately use its discretionary authority to implement higher conforming loan limits for the Chicago MSA.

Planned future efforts to decrease loan limits, to reduce to the government footprint in the mortgage market, when combined with the inequity of the current one-size-fits-all HCCR will result in the worst possible outcome for the Chicago area - future lower limits on a lower base - and will continue to negatively impact the growth and prosperity of the entire region. Read Comment Letter.