Rep. Gary Ackerman (D-N.Y.) and 36 other lawmakers recently sent a letter to the House appropriations committee urging members to extend conforming loan limits for mortgages beyond October 1, when the limits are set to drop.
A quick refresher: 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.
In July, Ackerman and Rep. John Campbell (R., Calif.) 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.
Here is a section of the letter that Ackerman wrote in which he explains the effect lowering the limits:
Private mortgage-lenders would have to assume the risk for mortgage loans above the lowered limits, something they have been unwilling to do in a weak housing market without passing the additional risk onto homebuyers in the form of higher interest rates and larger down payments, both of which would depress the housing market further.
Ackerman and Campbell are not the only congressmen who are in favor of maintaining the higher loan limits, at least temporarily. A few months 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/lawmakers_lobby_for_extension_of_higher_loan_limits/4121
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