The proposal requires legislation because current law restricts the ability of the F.H.A. to refinance loans that exceed the value of the borrower's home.
If digital banks start to mimic conventional lenders and make loans that exceed the amount of deposits they keep on hand, the system will become prone to runs.
"Most nonconforming loans are loans that exceed our $227,150 maximum loan limit," Mr. Zigas said, adding that loans can also be considered nonconforming if the criteria used to approve the borrower for the mortgage do not meet Fannie Mae or Freddie Mac standards.
Many more Americans have mortgage loans that exceed the value of their homes because of falling housing prices, and critics warn that if an aid program is too generous, it could encourage borrowers to walk away from their homes.
Institutional investors became less willing to buy 30-year loans that exceed Fannie Mae's congressionally set limit on mortgage size - last year it was $20,000 less than the current maximum of $153,100 for a single-family home mortgage.
As a result they also tend to have bigger loans, known as jumbos -- loans that exceed the dollar ceiling set for purchase and repackaging as tradable securities by Freddie Mac and Fannie Mae, the government-chartered enterprises that buy home loans from lenders, giving the lenders the cash to make more loans.
Jumbo loans -- loans that exceed conforming limits imposed by Fannie and Freddie -- have stricter credit score requirements.
Lenders will be asked to reduce by 15% or more the principal owed on a loan that exceeds the current value of the home.
In short, what this means is that buyers who need a loan that exceeds the new limit will be forced to obtain a "jumbo" mortgage loan, which is often considerably more expensive.
Under the new rules, any portion of the loan used for a purpose other than buying or improving a home is subject to the AMT, as is any portion of the loan that exceeds the home's original cost plus improvements.
