Push mortgage limits extension

U.S. Representatives Gary Ackerman and John Campbell have introduced legislation that would allow the Federal Housing Administration (FHA), Freddie Mac and Fannie Mae to continue guaranteeing mortgages of up to $729, 750 in the New York Metropolitan area.
In order to stimulate the housing market in New York, the insurable mortgage limit was increased to this amount in 2008 in “high cost” areas such as Queens.
On October 1, the limit will return to $625,500, forcing borrowers seeking higher mortgages to obtain pricier, privately-funded jumbo mortgages. In the current, uncertain financial period, many private lenders are demanding down payments of 20 percent or more on mortgages.
“The housing market does not need a self-inflicted wound,” said Ackerman, who represents New York. “With the economy remaining fragile and the local housing sector still struggling to recover, now is not the time to make the cost of mortgages more expensive.”
Fannie Mae and Freddie Mac, which are Government Sponsored Enterprises (GSE) created by Congress, control 95 percent of mortgages in the United States. The FHA provides mortgage insurance for approved lenders throughout the country. It has insured 34 million properties since its commencement in 1934, making it the largest insurer of mortgages in the world.
If the maximum mortgage limit is diminished, 27 percent of owner-occupied homes for GSE financing and over 59 percent of all owner-occupied homes for FHA financing will be disqualified. According to the National Association of Home Builders, roughly 17 million houses in the United States will also be ineligible for cheaper federal funding if the limit is decreased.
Ackerman went on to say, “Reducing the conforming loan limit would hurt home values, increase the cost of down payments and interest rates, and shut prospective buyers out of home ownership creating a burden for potential buyers and sellers. It is essential that we continue to do all that we can to stimulate our economy and keep these mortgage limits in place to ensure that the housing market remains on the delicate road to recovery.”
The legislation, known as the Conforming Loan Limits Extension Act, proposes a two-year extension of the current limit, lasting until October 1, 2013.