Lenders: Keep the limits on loans up
The U.S. Mortgage Bankers Association plans to ask Congress to permanently retain the limit for Fannie Mae and Freddie Mac purchases or guarantees of single-family mortgages at $729,750 in high-cost areas to bolster the housing market.
The bankers' residential board of governors voted to approve the recommendation this past week at the trade group's annual conference in San Francisco.
"It will be stimulative," said Garry Cipponeri, senior vice president of Chase Home Finance in Iselin, N.J., and head of the mortgage bankers' capital markets committee. "This market needs liquidity."
A higher guarantee by the government agencies is needed to spur lending in the most-expensive local housing markets (which includes Seattle), Cipponeri said.
The availability of mortgages above $417,000, known as nonconforming loans, "has gotten worse" amid a tightening of credit standards, he said.
House Financial Service Chairman Barney Frank, a Massachusetts Democrat, said he will push to ensure the loan limit in high-cost areas is at $729,750 if Congress "has the right political alignment."
The higher limits would be helpful for homeowners and allow "people to be able to buy houses cheaper. And it helps the institutions because they make money on those. They don't lose money," Frank said. The limit, which caps the size of mortgages the companies can buy, has been at $729,750 on a temporary basis and is scheduled to fall to $625,500 in the roughly 90 most expensive real estate markets on Jan. 1 without Congressional action.
The government last month took control of Fannie Mae and Freddie Mac partly to encourage lending.
Mortgages are more difficult to obtain amid surging foreclosures and falling prices in the worst U.S. housing slump since the 1930s. Home-loan originations may drop almost 20 percent this year to $1.9 trillion, about half the 2003 record, according to the mortgage bankers group.
Source: http://seattletimes.nwsource.com/html/
