Big home-loan limits likely to stay till 2011

October 28th, 2009, 4:47 pm · Post a Comment · posted by Mathew Padilla

The latest from National Mortgage News (note:Orange County is a high cost area):

House and Senate appropriators have agreed to extend the current loan limits for Fannie Mae, Freddie Mac and Federal Housing Administration loans for another year as part of the continuing funding resolution Congress is expected to pass this week. “The CR [continuing resolution] maintains the limits for FHA, GSE … single-family mortgages at $729,750 through the end of calendar year 2010,” according to a statement issued by the chairmen of the appropriations committees. The maximum $729,750 loan limit is due to expire Dec. 31 and it would drop down to $625,500 if it were not extended. “This could result in major disruptions in the mortgage origination market for larger loan sizes as early as November,” the appropriations chairmen said. Earlier in the week, industry trade groups warned Congress that quick action is needed because it is becoming more difficult for lenders to approve mortgages with balances above $625,500 due to uncertainty about an extension.

So another year of putting taxpayer dollars at greater risk.

Of course, the housing market might collapse if all the government programs were scaled back at once. No chance of that happening, apparently. The Federal Reserve has already said it’s extending its purchases of mortgage-backed securities until the end of March.

And Bloomberg reports Senate Democrats plan to extend and expand the $8,000 first-time home-buyer tax credit, allowing some folks to get it who already own a home. Senators seek to extend the credit, due to expire Nov. 30, to home purchases under contract by April 30, with borrowers allowed another 60 days to close the sale.

As I have said before, the tax credit may boost sales but it is wasteful, since some people get it who would have bought anyway.

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