Qualified and Non-Qualified Mortgage Essentials Practice Test

The main idea here is who sets the size of loans that Fannie Mae and Freddie Mac can buy. That responsibility lies with the FHFA—the Federal Housing Finance Agency. The FHFA oversees Fannie Mae and Freddie Mac and annually establishes the conforming loan limit, which is the maximum loan amount those two agencies can purchase or guarantee. The limit can vary by region and is higher in areas with more expensive housing.

Understanding this helps explain why a loan is considered conforming: if its amount is at or below the FHFA’s limit, it can be sold to Fannie Mae or Freddie Mac as a conforming loan; if it exceeds that limit, it’s typically a jumbo loan and not eligible for those agencies’ standard purchases.

The other agencies mentioned don’t set these limits: HUD administers federal housing programs and handles FHA-insured loans (which have their own limits), while the FDIC regulates banks and deposit insurance, not loan size limits.