Senators Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.) introduced a bill this week to extend the elevated conforming loan limits through the end of 2013.
The bill joins a similar effort
in the House, where Rep. John Campbell (R-Calif.) and Rep. Gary Ackerman (D-N.Y.) introduced another bipartisan extension in July.
Both bills would allow the government-sponsored enterprises and the Federal Housing Administration
to guarantee or buy mortgages worth as much as $729,750 in most neighborhoods. If legislation does not pass by Oct. 1, the conforming loan limits will drop to $625,500, though it will vary by county.
Congress boosted the limit in 2008 in response to the housing downturn. Private liquidity in the market had dried up, and the government essentially decided to support 95% of mortgage finance space through Fannie Mae
, Freddie Mac
and the FHA.
"Allowing existing loan limits to expire during this difficult economic time would make a struggling housing market even weaker. I am also concerned that failing to extend these limits will make it even more difficult for the average homebuyer get a mortgage and buy a home when credit is already tight,” Isakson said Thursday.
The Mortgage Bankers Association
immediately supported both the House and Senate bills, and is lobbying Congress to act quickly. The trade group's CEO David Stevens said uncertainty over where the conforming loan limits will land is already impact lenders' ability to guarantee lower interest rates for potential homebuyers.
"This bill is consistent with MBA's policy that the loan limits should be allowed to fall back to the lower levels once the housing market stabilizes," Stevens said. "Given the slowdown in the housing recovery, we have concerns whether this is the right time to add another stress to the market."
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