Congress should extend increased loan limits on mortgages backed by Fannie Mae and Freddie Mac that are set to expire at year end, according to the powerful chairman of the House Financial Service Committee Democratic Rep. Barney Frank of Massachusetts. Congress raised the ceiling on the size of the loans in 2008 to help ease the credit crisis.
Analysts warn the distressed housing market could take a fresh hit if they are not extended beyond December.
The higher limits, which vary by region, top out at $729,750 for single family homes in the most expensive parts of the country, except for Alaska and Hawaii, which have higher limits. Previously the cap was $417,000. The House of Representatives in late July voted to extend them through September 2011 as part of an annual spending bill for the Department of Housing and Urban Development. The Senate, however, has not passed its version of the bill.
Sellers asking between $450,000 and $800,000 for their homes may not be able to sell even before the limits expire, since prospective buyers would be reluctant to sign a contract without certainty they could get financing. Treasury Assistant Secretary Michael Barr told Reuters that the Obama administration "would be supportive" of an extension of the higher limits.