Federal home loan limit increases proposed by California Reps. Jerry McNerney, D-Pleasanton, and Gary Miller, R-Diamond Bar, have been included in a package of bills intended to help ease the mortgage crisis headed for deliberation in the House later this week.
Congress temporarily raised the maximum FHA loan guarantee cap to $729,750 earlier this year but it will revert to $362,790 unless lawmakers extend it. The lower limit is well below the cost of homes in the Bay Area.
Read more for the press release from McNerney’s office:
MCNERNEY LOAN INCREASE TO BE INCLUDED IN HOUSE HOUSING/FORECLOSURE BILL
Washington, D.C. – A provision authored by Congressman Jerry McNerney (CA-11) to make permanent the loan limit increases for Fannie Mae, Freddie Mac and the Federal Housing Administration will be included in a major housing and foreclosure package the House is set to vote on later this week.
“This provision will mean that we can provide fiscally responsible relief to American families and help stabilize the volatile housing market,” said Rep. McNerney. “The foreclosure crisis has hit Stockton and San Joaquin County particularly hard as families have lost their homes and neighborhoods have become destabilized. I’m pleased the bipartisan legislation I authored will be included to help those facing financial difficulty and to provide stability to the market.”
Rep. McNerney worked with Congressman Gary Miller (R, CA-42) to introduce the bipartisan legislation yesterday. Rep. McNerney received word from Chairman Barney Frank, chairman of the House Financial Services Committee, which has been crafting a package of legislation to respond to the nationwide housing and foreclosure crisis, that the McNerney/Miller provision would be included in the larger package.
“I appreciate Congressman McNerney’s efforts to highlight the importance of permanently increasing the loan limits that were included in the bipartisan Economic Stimulus bill,” Chairman Frank said. “We should not discriminate against areas of the country because the cost of housing is more expensive. All Americans should have the benefits of FHA and GSE mortgage programs, and I plan to include McNerney/Miller loan increase amendment in the housing bill we will be voting on this week.”
The Economic Stimulus Act that was signed into law last February included temporary increases in loan limits for the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, and the Federal Housing Administration (FHA). During consideration of that legislation, Rep. McNerney raised the need to increase the loan limits directly with Speaker Pelosi.
The McNerney/Miller provision will ensure that the maximum limits of $729,750 are maintained, opening responsible mortgage opportunities for families to obtain fixed-rate mortgages and help alleviate the current market difficulties. The provision would mean an expansion in loan limits and access to stable mortgage products in all four counties in the 11th district: Alameda, Contra Costa, San Joaquin and Santa Clara.
If Congress does not act, the FHA loan limit will revert back to $362,790, well below the median home price in the four counties. Additionally, the GSE conforming loan limit will fall to $417,000 at the end of the year.
Established in 1934, the FHA provides mortgage insurance for prospective homebuyers. Fannie Mae and Freddie Mac purchase mortgage loans from lenders, providing lenders with the capital they need to make additional home loans. Both entities, however, are barred by law from insuring or purchasing loans above a certain size.
Californians already face home prices substantially higher than the national average. In 2007, the median home in California cost $558,100 and today in many parts of Northern California it is substantially higher.
Making permanent the increase in conforming loan limits will offer substantial benefits by increasing the availability of credit in the housing market.