An amendment that would reinstate recently expired super-conforming limits has made it through one legislative chamber. But not everybody thinks the legislation is a good idea.
The Senate approved an amendment on Thursday that would reinstate higher loan limits that expired last month on loans insured or guaranteed by the Federal Housing Administration, Federal Home Loan Mortgage Corp., Federal National Mortgage Association or Department of Veterans Affairs.
The Homeownership Affordability Act of 2011, S. 1508, was introduced by Sens. Bob Menendez (D-N.J.) and Johnny Isakson (R-Ga.) in August. The bill extends temporarily higher limits in high-cost housing markets.
The extension would be in place until Dec. 31, 2013.
“The effects of a possible expiration could be dramatic,” a letter from Isakson and Menendez to their Senate colleagues said. “Access to mortgage credit will be significantly impeded for many homeowners and sellers across the country, at a time when the housing market is very weak and credit continues to be tight.”
National Association of Home Builders Chairman Bob Nielsen in a statement Friday called the legislation “essential to help mend the struggling housing market.”
But Nielsen warned that Congress needs to move quickly to enact the bill into law.
“Otherwise, the current drop in mortgage loan limits will reduce housing demand, and place downward pressure on home prices in major markets,” Nielsen stated. “This will exacerbate the current housing downturn, trigger more foreclosures, impede job growth and endanger the fragile economic recovery.”
The Mortgage Bankers Association in August issued a statement in support of the legislation. The group’s chief, David H. Stevens, warned that it might not be the right time to let the limits expire given currently stressed housing markets.
Realtors weren’t as subtle as Stevens in their support of the legislation.
“The 1.1 million members of the National Association of REALTORS, representing millions of American families, urge you to vote YES on the Menendez/Isakson amendment to the T-HUD/Agriculture Appropriations bill to be considered this week,” the National Association of Realtors said in a letter Wednesday to Senators.
But the bill has its detractors.
Americans for Prosperity has voiced strong opposition to the amendment. The group, which says it supports cutting taxes and government spending, says that “one way to wean the markets off” government subsidies through Fannie Mae, FHA and Freddie Mac is to steadily reduce the conforming loan limit.
“Private issuers currently contribute little capital to the housing markets not because they don’t have the capacity, but rather because they are crowded out by the ultra-subsidized, government-owned GSEs and the taxpayer-backed FHA,” the group of 1.8 million activists said. “They simply cannot compete with the funding advantages these entities enjoy.
“If the conforming loan limit is gradually reduced, the government’s dominance will cover ever-smaller segments of the market, and the healthy, privately-funded ‘jumbo’ market for loans above the limit can expand to fill the void.”
