Two congressmen from high cost housing states have introduced legislation to extend the maximum $729,750 loan limit on government-backed loans for another two years.
If Congress fails to act by September 30, the loan limit on Fannie Mae, Freddie Mac, and Federal Housing Administration single-family loans will drop back to $625,500 in metropolitan areas such as Los Angeles and New York.
Reps. John Campbell, R-Calif., and Gary Ackerman, D-N.Y., introduced the bill (H.R. 2508) on Friday to ensure homebuyers in high cost areas have access to affordable financing at a time when there are few private alternatives.
“With the economy remaining fragile and the housing sector still struggling to recover, now is not the time to make the cost of mortgages more expensive," Rep. Ackerman said.
The reduction in the loan limit would impact 669 counties in 42 states, according to estimates.
The National Association of Home Builders and National Association of Realtors support the Campbell/Ackerman bill.
The mortgage industry appears divided, however. Some desire an extension while certain depositories want to see a gradual reduction of the loan limits as an opportunity to originate more private jumbo mortgages.
Meanwhile, the Obama administration and many Republican leaders support a reduction in the loan limits as a way to diminish the GSEs' grip on the mortgage market.
One observer noted that Congress is unlikely to pass H.R. 2508 as a stand-alone bill, but it could be added to must-pass legislation, such as the debt ceiling bill, to garner a few much needed votes to pass the measure.
