Congress took another step toward extending the conforming loan limits for the Federal Housing Administration
but not for Fannie Mae
and Freddie Mac
Members of a joint committee charged with approving a minibus spending bill released a revised package
on the continuing resolution late Monday. According to the new language, which awaits a vote both the Senate and House, the maximum loan amount on FHA-insured mortgages would be reinstalled to post-crisis levels and extended through the end of 2013.
Congress elevated the limits in 2008 to allow FHA, Fannie Mae and Freddie Mac to insure and guarantee more loans when credit markets froze. On Oct. 1, the higher limits expired, reverting back to $625,500 from $729,750 in the most expensive neighborhoods.
The Senate voted Oct. 20 to reinstall
the elevated limits in the minibus bill through an amendment filed by Sens. Johnny Isakson (R-Ga.) and Robert Menendez (D-N.J.).
Industry and consumer groups has been pushing Congress to reinstall the limits, claiming the market is still too fragile to be taken off government support.
FHA Acting Commissioner Carole Galante said Tuesday the expired limits as they stand should have little impact. These jumbo loans account for only 5% to 6% of the FHA portfolio. She also said reinstalling them wouldn't necessarily be a negative either since these are usually higher-credit borrowers.
However, the consequence of extending the limits for FHA but not Fannie and Freddie is simply unknown, she said.
"This is a situation that has never occurred before, where FHA would have the higher limits and Fannie and Freddie would not. It's hard for us to make any kind of prediction for how much of that business would come to the FHA without finding any other sort of alternatives," Galante said.
The Obama administration has supported allowing the limits to expire to begin the process of winding down the government's involvement in the mortgage market and allow private capital back in.
Redwood Trust (RWT)
, the only investment firm to issue privately funded residential mortgage-backed securities since the crash, said in its third-quarter note to investors that it is already seeing the benefit
of the loan-limit drop. Roughly 10% of the loans it acquired and plans to use in a future securitization would have otherwise gone to the GSEs, the company said.
Write to Jon Prior
Follow him on Twitter @JonAPrior