House leaders have struck a deal with the White House to increase Fannie Mae and Freddie Mac loan limits from $417,000 to a maximum of $730,000 during negotiations on a $150 billion economic stimulus package. The stimulus package, which Congress is expected to pass in a few weeks, also increases the Federal Housing Administration loan limit permanently. This increase reflects an agreement between the House and Senate banking committee chairmen to increase the FHA and GSE loan limits to 125% of median area home prices, with a $730,000 cap. The increase in the loan limit for the two government-sponsored enterprises would expire after 12 months. House Speaker Nancy Pelosi, D-Calif., negotiated the deal with Treasury Secretary Henry Paulson. But the GSE regulator said raising the loan limit is a "mistake" without passage of a comprehensive bill to strengthen regulation and oversight of Fannie and Freddie. "To restore confidence in the markets, we must ensure the GSEs' regulator has all the necessary safety-and-soundness tools," said James Lockhart, director of the Office of Federal Housing Enterprise Oversight.

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