The Senate voted 60-38 Thursday night to reinstall the elevated conforming loan limits on mortgages guaranteed by the government.
The higher limits expired Sept. 30. Sens. Johnny Isakson (R-Ga.) and Robert Menendez (D-N.J.) introduced an amendment to H.R. 2112, a minibus spending bill. The Senate approved the amendment Thursday, and the Senate will take up the full bill after the recess, according to Isakson’s office.
If the Senate approves the bill, it would then go to the House of Representatives for consideration.
The Isakson-Menendez amendment would extend the limits through 2013.
Congress elevated the conforming loan limits in 2008 to allow the Federal Housing Administration, Fannie Mae, and Freddie Mac to insure and guarantee more mortgages when the credit markets froze.
On Oct. 1, these elevated limits dropped to $625,500 from $729,750 in the most expensive neighborhoods. In each area, the cap dropped to 115% from 125% of the area’s median home price.
The housing industry has been pushing hard for an extension. The still struggling housing market, they said, still needs financing from the government even on the jumbo level.
Bob Nielsen, chairman of the National Association of Home Builders, applauded the Senate Friday morning and urged the House to reconsider their earlier rejection of the measure.
“Congress must act soon to ensure that this measure is enacted into law,” Nielsen said. “Otherwise, the current drop in mortgage loan limits will reduce housing demand and place downward pressure on home prices in major markets. This will exacerbate the current housing downturn, trigger more foreclosures, impede job growth and endanger the fragile economic recovery.”
However, the Obama administration stated in its February white paper on the future of housing finance that allowing the conforming loan limits to expire in October would be the preferred first step to reintroducing private capital and spare taxpayers from additional risk.
The Federal Reserve found in a recent study that allowing the conforming loan limit drop would have shut out only 1.3% of purchase mortgages last year.
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