A Deal May be Afoot to Restore GSE Loan Limits

A decision to restore the $729,750 maximum loan limit on government-backed loans likely will be made by House and Senate leaders — and not the appropriators, according to industry sources following the issue.

A deal may come at the “last minute,” according to these officials, as House and Senate appropriators wrap up negotiations on three bills — including a HUD appropriations bill — before the upcoming Nov. 11 Veterans Day break.

“Hill sources tell us that the issue of whether to restore the higher conforming mortgage loan limits that lapsed on October 1 will be decided last minute,” said Charles Gabriel, president of Capital Alpha Partners.

This gives Realtors, homebuilders and other mortgage-related groups a few more days to lobby members of Congress to raise the maximum loan limit from the current $625,000 to $729,750 for up to two more years.

One industry lobbyist said a loan limit increase would probably be jettisoned if left to the appropriators.  He expects the issue will come down to a trade off between Senate majority leader Harry Reid, D-Nev., and House Speaker John Boehner, R-Ohio.

Sen. Reid appears to have the stronger hand since the Senate voted 60-38 to approve an amendment by Senators Robert Menendez, D-N.J. and Johnny Isakson, R-Ga., to roll back the October 1 reductions on Fannie Mae, Freddie Mac and FHA loan limits. 

Accepting the Menendez-Isakson amendment would a big concession for House GOP leaders who are adamant about reducing the GSEs’ share of the mortgage market. But House Republican leaders also recognize that even conservative Republicans are divided over the loan limit issue.

One possible compromise would be to maintain the maximum loan limit at $625,500 in high cost areas while increasing the floor in lower cost areas to 125% of the median house price from the current 115%. Such a move would raise the Federal Housing Administration loan limit in nearly 600 counties in 42 states.

This option has “obvious allure” and would “substantially address the housing and mortgage industries’ concerns while allowing the House GOP to somewhat save face,” Gabriel said.

Daily Briefing | Friday, November 4, 2011

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Article source: http://www.nationalmortgagenews.com/dailybriefing/2010_469/deal-restore-gse-loan-limits-1027324-1.html

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