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RCED-84-151 1 (1984-04-05)

handle is hein.gao/gaobabnix0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 April 5, 1984 RESOURCES COMMUNITY AND ECONOMIC DEVELOPMENT DIVISION'III1 111 111 124072 The Honorable Steve Bartlett House of Representatives Dear Mr. Bartlett: Subject: Borrowers Pay Lower Effective Interest Rates for Large Conventional F ortgage Loans (GAO/RCED-84-151) Your December 23, 1983, letter, requested that we study how the statutory limit (generally referred to as the conforming i1mit1) on the size of home mortgages affects the behavior and pricing policies of lending institutions. Subsequently, we agreed to focus our work on three questions related to the impact of the 1983 statutory limit on home purchases. Specifically, the ques- tions were: 1. What proportion of conventional2 mortgage loans exceeded the conforming loan limit of $108,300 in 1983? 2. How did interest rates and fees paid by borrowers for conventional loans which exceeded the 1983 conforming limit differ from those paid by borrowers for conven- tional conforming loans? 3. What income would a hypothetical borrower need to qualify for the maximum conforming loan in various high-cost housing markets if the conforming limit was raised as proposed in H.R. 3420? 1The conforming mortgage loan limit is the maximum value that a home loan purchased by the Federal Home Loan Mortgage Corpora- tion or the Federal National Mortgage Association can have. Loans which do not exceed the limit are referred to as conform- ing loans. 2Conventional loans are those which are not guaranteed or insured by a federal agency, such as the Federal Housing Administration (FHA), Veterans Administration (VA), or the Farmers Home Administration (FmHA). (387502) O) 7 5<

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