Make Higher Loan Limits Permanent?

Back in June, I reported that effective October 1, 2011 the temporary emergency legislation Congress enacted in 2008 that raised the limits on conforming loans in expensive housing markets like NYC (Manhattan) expires and is not expected to be extended. In October the amount will be lowered from $729,750 to $625,500 for a High Balance Conforming Loan.

In an article by Alan Zibel in today’s Wall Street Journal Representative Barney Frank (D-MA) is advocating making the current conforming loan limits permanent.

In most places across the country the loan amount is $417,000. In some high cost areas where the median home price exceeds the conforming limit (such as New York, Los Angeles, Boston etc.) this amount has been $729,750 since 2008. Loans that fall between $417,000 and $729,750 but are still eligible for government backing are referred to as high-balance conforming loans.

Real estate is local. Representative Frank is quoted in the Wall Street Journal saying:

“The same level can’t be right for the whole country. It would be an especially bad time economically to lower conforming limits.”

There is proposed legislation from Rep. Brad Sherman (D-CA) and Rep. Gary Miller (R-CA) that would permanently extend the current conforming loan limits. The bill is backed by the National Association of REALTORS and The National Association of Home Builders.

Republican lawmakers want to remove the government from housing finance altogether. The article in today's Journal indicates that a one year extension of the current limits is probably more likely than a permanent extension.

Whether enough members of the Republican - controlled house will support such a move, is an unknown. The chances of an extension passing hinges on how serious the Tea Party Republicans are on reducing the government’s involvement in mortgages.

Politics and real estate are both local. Location, location, location. Most members of the new Tea Party Republican - controlled congress primarily represent rural conservative districts with low cost housing.

2011/06/high-conforming-loan-limits-reduced