Real estate groups call for extension of bigger loans

October 26th, 2009, 6:18 pm · 17 Comments · posted by Mathew Padilla

In Orange County, banks can make loans up to nearly $730,000 and sell them to government-controlled mortgage giants Fannie Mae and Freddie Mac or get the loans insured by the Federal Housing Administration.

But the bigger limits expire on Dec. 31. The Fannie/Freddie limit used to be $417,000 and the FHA limit was lower than that.

The Mortgage Bankers Association, the National Association of Home Builders and the National Association of Realtors sent congressional leaders a letter asking for extensions. Here’s the letter:

The undersigned organizations strongly urge Congress to enact legislation as soon as possible to extend the current higher loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). The higher limits are a key component of the economic recovery efforts because they help make affordable loans available for a broader spectrum of consumers who want to purchase a home or refinance an existing mortgage. Even though the temporary limits do not expire until the end of this year, obtaining financing is already becoming more difficult and expensive for many borrowers. Therefore, we request Congress extend the limits as soon as possible so as not to jeopardize the fragile recovery.
The impending expiration of the higher loan limits is already having an impact on borrowers’ ability to obtain affordable financing in the following ways:

Some lenders have stopped underwriting certain loans at the current interest rate because lenders are uncertain whether they will be able to sell the loans, and are unable or unwilling to retain them in their own portfolios. The result is that borrowers are being unnecessarily denied financing because of uncertainty about expiring loan limits.

Consumers cannot lock in current interest rates beyond 60 days for loans over $625,500. As a result, loans that do not close before year-end will need to be re-underwritten and possibly then declined because of the higher interest rate and resulting mortgage payment.

Routine activities like mortgage pre-approvals or home purchase contracts are being complicated by the loan limit uncertainty, making shopping difficult for would-be homebuyers.

We also note that an immediate extension of the loan limits is necessary in order to provide sufficient time for FHA, the Federal Housing Finance Agency, and the GSEs to conduct market assessments, provide guidance and implement them. For example, the current loan limits, set by the American Recovery and Reinvestment Act of 2009 (ARRA), did not become fully operational until four months after the law was enacted.

We believe these temporary limits have benefited the mortgage industry and consumers during what has been a turbulent period for our nation’s economy. In light of the continuing weakness in the secondary market, we urge Congress to take action so that the GSEs and FHA can be permitted to continue providing capital to support loans to families across America.

The market for jumbo loans, which are above the limits, is pretty dead, or so I hear. Although some lenders are making jumbo loans and holding them on their books.

However, bigger loans mean putting more taxpayer dollars at risk. At some point, these programs must end or at least be scaled back.

Industry groups are also pleading for an extension of the first-time home buyer tax credit that ends in Nov. 30. The tax is wasteful, since some folks who would have bought anyway get the credit.

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lee in irvine says:

October 26, 2009 at 6:49 pm

“The Mortgage Bankers Association, the National Association of Home Builders and the National Association of Realtors sent congressional leaders a letter asking for extensions”

Excuse me, but the banks are insolvent and the country is now borrowing more than 10% of the GDP. The REIC needs to STFU, and stand down!

Post Reply

October 26, 2009 at 7:02 pm

Excuse me Matt … but you have hit a sore spot.

Now for the soap box!

For too GD long, these scum-bags (REIC) have been dictating law and policy in DC & Sacramento! They have run the american dream right in the ground! Now that the music has finally ended, and there’s nothing left to fund their overpaid salaries, they’re pleading for the govt to remain their sugar daddy, even at the expense of future tax payers.

Enough (stomp-stomp)!!

Mathew Padilla says:

October 26, 2009 at 7:45 pm

I think the politicians are aware more folks feel the same way.

But in addition to lobbying from RE folks, politicians face a jobless recovery or even a job loss recovery. They will be under intense pressure to look like they are doing something.

Post Reply
- BeyondTheMargin.net says:
  
  October 27, 2009 at 9:50 am
  
  To a certain degree, the housing markets in CA are much different than say the midwest and there should be additional liquidity provided by FNMA and Freddie, but at the same time this additional liquidity ultimately just inflates prices by lowering borrowing costs in much the same way that all the “affordability” products did leading up to the housing collapse. No government intervention comes without consequences and the rising defaults that American taxpayers are subsidizing is a perfect example.
  
  http://www.beyondthemargin.net/search/label/Economics%20and%20Finance
  
  Post Reply

OC House says:

October 26, 2009 at 8:03 pm

Unfortunately, the financially responsible people are in the minority. Until some of these politicians actually get booted out because of their support for these types of programs, they will continue to do so to “buy” votes from the poor, the stupids, frauds and ignorants…

diddly-squat for naught says:

October 28, 2009 at 8:47 am

I agree whole heartedly with the way you put it.

Post Reply

Republicans are TRAITORS says:

October 26, 2009 at 9:47 pm

NIET!

End fannie, freddie and ginnie. Any politician who tries to extend this scam, vote them out of office.

Matt,
It is up to you to raise hell about this.

diddly-squat for naught says:

October 28, 2009 at 8:50 am

Why is it just up to Matt to do all the hell raising? Since congress is controlled by the Dems, why don’t the “Dems are Dummies’ do some hell raising, too?

Post Reply

foolishpleasure says:

October 26, 2009 at 10:49 pm

what? the realtors and the homebuilders want more taxpayer funded
welfare programs- I’m shocked shocked I say

http://seekingalpha.com/article/168713-fantasy-housing-numbers-a-prelude-to-the-next-u-s-crash?ref=patrick.net

se says:

October 27, 2009 at 6:56 am

And we just keep kicking the can further down the road…..

Pretty soon we’re bound to run out of ways to artificially inflate housing prices (just wishful thinking).

dafox says:

October 27, 2009 at 7:37 am

I completely agree with you on all points (sadly)

Post Reply

Tom M says:

October 27, 2009 at 8:26 am

We have the best government money can buy off.

diddly-squat for naught says:

October 28, 2009 at 8:53 am

As long as the U.S. Treasury doesn’t run out of ink! We’ll be just fine…Obama has had 10 months of practice in using the money printing press.

Post Reply

Ed says:

October 27, 2009 at 10:56 am

Here is the reality on what politicians think. How much will you donating to my campaign fund? How much can you help me get elected/re-elected? Most politicians don’t care about common sense or ethics, (note i said most, not all, there are a few good ones out there) they care about their own backs and their “friends” like the REIC. If the numbers look good, they will pass any request/law regardless of how crazy. If the public figures out their scam, they hire better PR folks, eventually they come up with something so insane and confusing that no one knows what is really included. Health Care reform documents anyone?

Scotty says:

October 27, 2009 at 12:49 pm

—-They will be under intense pressure to look like they are doing something.

Shouldn’t this ALWAYS be the case?

Ed says:

October 27, 2009 at 3:11 pm

Yes but “looking” like you are doing something is totally different from actually “doing” something.

Post Reply

Bill-1a says:

October 28, 2009 at 10:31 am

A newly elected politician may have his heart and mind in the right place, until he reaches Washington. Once there, he’ll try to improve things until he realizes he can’t do anything unless he falls in line with the rest of the “good-old-boys” and does it their way. Too much pressure from these good-boys, no agreements on bills, and now you’re on the outs. It doesn’t take long for our newly elected congressman or senator to find out how things are really done in WDC (or not done I should add) and bucking the agenda will get them nowhere except back to their 9 to 5 job. This cycle just keeps going round and round, and if you see a broken spoke, don’t fix it, just get rid of it.

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