New Bill Would Keep Home Loan Limits at $729,750

by Mark Wellborn


Late last week, Representatives John Campbell (R., Calif.) and Gary Ackerman (D., N.Y.) proposed the Conforming Loan Limits Extension Act in the House of Representatives, a bill that would extend the current home loan limits on mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration for another two years.

In February, the Obama administration issued a white paper for how to reduce government support of the mortgage market. One recommendation was that, on October 1, the temporary increase on conforming, government-backed home loan limits should expire, reducing the limit from $729,750 to $625,500 in the DC area, and to lower amounts in other parts of the country. The Housing and Economic Recovery Act of 2008 upped the limit on conforming home loans in more expensive home markets like the DC area from $417,000 to $729,750 because the availability of those size loans in the private market all but disappeared. The insurance that loans up to $729,750 would be backed was reinstated in the economic stimulus bill passed at the start of the Obama presidency, and was renewed again last year.

The proposed bill has a ways to go, but Ackerman and Campbell are not the only congressmen who are in favor of maintaining the higher loan limits, at least temporarily. A few weeks ago, The Wall Street Journal reported that Barney Frank thinks that the higher loan limits should remain in place.

From the WSJ:

“The same level can’t be right for the whole country,” Mr. Frank told reporters at a press conference. He also argued that, with the housing market and broader economy still weak, “it would be an especially bad time economically to [reduce limits].”

For more about how the lowering of limits would affect the local housing market, click here.

This article originally published at http://dc.urbanturf.com/articles/blog/new_bill_would_keep_home_loan_limits_at_729750/3814


  1. R said at 1:33 pm on Monday July 18, 2011:

    Cute.  Good luck getting that to move anywhere in this environment.

  1. Elbow said at 1:50 pm on Monday July 18, 2011:

    I agree with R. Also, the timeline seems incredibly short in which to turn something like this around.

  1. Lauren said at 2:15 pm on Monday July 18, 2011:

    Right, it seems like even if it passed it would just be vetoed by Obama?

    Also, I’m wondering if anyone can break down what this will actually mean for buyers. Let’s say hypothetically I’m looking to buy a $900,000 home and I have a 20% downpayment so I need to borrow $720,000. How much higher will the interest rate be after Oct 1 when the loan isn’t insured by Freddie & Fannie? Or would it just be more difficult to get a loan at all?

  1. Mark Wellborn said at 2:54 pm on Monday July 18, 2011:


    These days, if a lender puts a borrower’s loan application through Fannie Mae and Freddie Mac’s underwriting system, and it is approved, then the government assumes the risk of a borrower defaulting on a loan up to $729,750, not the lender. On October 1st, the default risk for loans over $625,500 in DC (and other expensive markets) will fall to the lenders, not the government.

    While it is difficult to speak to exactly how the change will effect a hypothetical situation like the one you posed, what it likely means for borrowers are higher down payments and interest rates, and dealing with more stringent underwriting guidelines from lenders.

    Hope this helps.

    Mark Wellborn

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