An extension to the elevated conforming loan limits is not so far-fetched, according to Robert Toll, the executive chairman of luxury homebuilder Toll Brothers (TOL). On Oct. 1, the maximum mortgage amount that can be guaranteed or financed by Fannie Mae, Freddie Mac or the Federal Housing Administration drops across the country. The ceiling falls to $625,500 in the most expensive neighborhoods though it varies by county. Congress pushed the limit up to $729,750 in 2008 when liquidity in the mortgage markets froze. Both the Obama administration and Republicans in Congress want private capital to return, and the first step to doing so would be to allow the conforming loan limit to drop. The industry, however, wants an extension, and two bills in Congress would provide it if passed. “My sources in D.C. say you shouldn’t be surprised to see an extension to the conforming loan limits,” Toll said in a conference call with investors Wednesday. Few are watching the political developments closer. The luxury homebuilder pushed profits up 54% in its fiscal year third quarter, but Toll admitted demand is down. The builder expects to deliver between 2,474 and 2,675 homes for its fiscal 2011, which would be roughly flat from the 2,605 a year earlier. Toll Brothers hit a high with 10,372 homes contracted in fiscal 2010. The company did find bright spots in its operations. CEO Douglas Yearley said with its capital advantages, Toll Brothers continually outbids investors for land opportunities in New York. Yearly also said its distressed loan and asset management firm Gibraltar Capital and Asset Management netted the company $4 million in the quarter. “We are excited about Gibraltar,” Yearley said. “If you know anybody that has some troubled loans, we have the capital and the skill to work them out.” Still, demand for the company’s core business remains weak given the economic uncertainty and volatile stock market. “There is a negative feeling coming out of budget crisis, the stock market gyrations, uncertainty around the loan limits and the mortgage tax deductions, Fannie Mae, Freddie Mac,” Toll said. He then switched his tone, pointing to the government’s failure to provide any certainty on these issues. “If there’s anybody who should be nervous,” he said, “it should be the guys in Washington.” Write to Jon Prior. Follow him on Twitter @JonAPrior