• Tweet

• Tweet

A strong lobbying push by a bipartisan group of lawmakers is being made to prevent a scheduled drop in the maximum size of mortgages backed by the government-sponsored enterprises.

Banking and housing groups are aiding lawmakers in their efforts to avert the ceiling drop of $104,250 of loans backed by Fannie Mae, Freddie Mac.

The current elevated limits of loans backed by these groups are the outcome of a sequence of steps taken by Congress to boost an unscrupulous U.S. housing market in 2008.

However, efforts by Senator Robert Mendez, D-N.J., Johnny Isakson, R-Ga., and Diane Feinstein, D-Calif., to extend the higher limits until Dec. 31, 2013 (through a bill introduced recently) may face heavy opposition from House Republican leadership and the Obama administration.

The good news is the GOP and the Obama administration finally agree on something.  The bad news is, if the October 1 scheduled drop occurs, it could cause further complications in the housing market.  The bill does cover the cost of maintaining higher loan limits by increasing the guarantee fees charged on the loans, quelling the concern of many Republicans that it would increase the deficit.

“If we don’t extend them, and they’re allowed to drop, you’ll take what is already a struggling housing market and further depress it,” said Rep. John Campbell, R-California.

A buyer of a single-family home in an expensive part of the country can get a Fannie Mae or Freddie Mac-backed mortgage today for up to $729,750.  Yet, unless an extension is passed by Congress, that figure will fall $104,250 to $625,500.

Those most likely to be affected will be homeowners in New York City, Los Angeles, San Francisco, Miami and similar cities, where homes are often priced higher than the loan limit.  The reduced limit would cause more home mortgages to be treated as jumbo loans.

In addition to conventional loans, the Federal Housing Administration projects that its loan limits ($271,000 to $729,750) will decline nearly 20 percent in counties throughout 42 states.

It’s expected that lobbyists and politicians on both sides of the aisle will continue to debate over the next couple of months. We’ll be sure to keep you posted on the outcome and the potential aftermath.

 Printer Friendly Version