The U.S. Mortgage Bankers Association plans to ask the Federal Housing Finance Agency to increase the limit for Fannie Mae and Freddie Mac purchases or guarantees of single-family mortgages to $625,500 to bolster the housing market.
The mortgage bankers’ residential board of governors is scheduled to vote today on the recommendation, which would call for an increase of 50 percent above the current limit of $417,000 in most areas, at the trade group’s annual conference in San Francisco.
“It will be stimulative,” Garry Cipponeri, senior vice president of Chase Home Finance LLC in Iselin, New Jersey, and head of the mortgage bankers’ capital markets committee, said in an interview. “This market needs liquidity.”
A higher limit guaranteed by the government agencies is needed to spur lending in the most expensive housing markets, such as California and New York, Cipponeri said. The availability of mortgages above $417,000, known as non-conforming loans, “has gotten worse” amid a tightening of credit standards, he said.
Congress approved raising the limit temporarily to $729,500. That increase expires at the end of the year and lawmakers would decide whether to raise the limit permanently, with the Federal Housing Finance Agency having oversight of Fannie Mae and Freddie Mac.
The government last month took control of Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac partly to encourage lending.
Up to Congress
Under the Housing and Economic Recovery Act passed in July, the government agencies keep the $417,000 limit for most areas and increase it in high-cost areas based on median home prices, said Corinne Russell, spokeswoman for FHFA Director James Lockhart. Any change will be up to Congress, she said.
Home-loan originations may drop almost 20 percent this year to $1.9 trillion, about half the 2003 record, according to the Washington-based mortgage bankers group.