MBA Calls for Extending 'Temporary' Hike in Loan Limit

In an effort to bring additional liquidity to the housing market, the Mortgage Bankers Association is recommending increasing the size of mortgage loans that Fannie Mae, Freddie Mac and the Federal Housing Administration can purchase in high-cost markets like California and New York. The 2008 Economic Stimulus Plan, enacted in February, temporarily increased the size of mortgage loans purchased by FHA and the government-sponsored enterprises to as much as $729,750, enabling many borrowers in high-cost metro areas to refinance. The temporary stimulus expires at year-end and loan limits next year will be determined by a provision of the American Housing Rescue and Foreclosure Prevention Act, which sets both conforming and FHA loan limits to 115% of the local median home price, not to exceed $625,000. Garry Cipponeri, a senior vice president of secondary marketing at Chase Home Finance in Iselin, N.J., said the MBA wants to extend the temporary loan limits particularly in high-cost areas of California, New York and Texas. "There are lots of suburbs where the current plan has no effect," he said Tuesday at the MBA conference in San Francisco. "Hopefully this will really help the housing industry."