Higher Loan Limits Are Needed for FHA, Freddie Mac & Fannie Mae

Making the higher loan limits permanent will increase investor confidence and the availability of safe, fair, affordable mortgage credit for borrowers and those wishing to refinance.  Higher loan limits will help stabilize mortgage markets and the economy as a whole.

Please contact your Senators today to ask them to make the higher loan limits permanent.

Sample Letter for Campaign

Subject: Make Higher Loan Limits Permanent for FHA, Freddie Mac & Fannie Mae

Dear [ Decision Maker ] ,

As your constituent and a REALTOR, I urge you, as a Member of the Senate, to support making permanent the FHA, Fannie Mae and Freddie Mac loan limits in the bipartisan Economic Stimulus Act, signed by President Bush last February, and support a homeownership tax credit that will spark additional residential sales to help solidify housing prices.

The House -passed housing stimulus bill, H.R. 3221, makes the $729,750 limits permanent. Senate bills cap the limits at $625,500. Our 1.2 million members applaud the progress the Senate has achieved, but strongly believe that the final bill must include the House bill's loan limits. The higher limits help homeowners in 240 counties in 26 states and can help get our national economy back on track.

The national mortgage market meltdown dramatically raised the cost and reduced the availability of mortgages in my market. Higher limits are helping to revitalize local housing markets, providing safe, fair and affordable mortgages for our state's homeowners. The limits are also helping to stabilize our entire economy. Higher limits simply reflect market realities in high cost areas. A lower limit unfairly penalizes citizens based simply on geography.

Drastically reducing the temporary limits at year's end to the Senate cap of $625,500 will push our fragile housing and credit markets back into turmoil. We need permanent limits of $729,750 to steady our housing markets and help citizens of every state - not just residents of high cost areas. Please support making the $729,750 loan limits permanent.

A homebuyer tax credit will encourage qualified homebuyers back into the market, and help to stabilize housing prices.

Sincerely,

Campaign Launched:
May 29, 2008


Background Information

NAR supports legislation to make permanent the loan limits included in the economic stimulus legislation.  Mortgage availability and affordability continue to be problems, and making the loan limits permanent will create stability in those markets and in our economy as a whole.  Dramatically reducing these limits in more than 240 communities in 26 states on December 31, 2008 would throw mortgage markets into turmoil. 

The Economic Stimulus Act retains the GSE current national limit of $417,000, and for higher cost areas in 26 states and the District of Columbia increases the limit to 125 percent of the area median, capped at $729,750.  For FHA, the Economic Stimulus Act raised ALL the loan limits from a base of $200,160 and a cap of $362,790 to a new base of $271,050 and a cap of $729,750.  The new GSE and FHA limits are slated to expire on December 31, 2008.

About Higher Loan Limits

  • The recently enacted economic stimulus package raised FHA, Freddie Mac and Fannie Mae loan limits to levels more accurately reflecting home prices. 
  • The economic stimulus loan limits for FHA and the GSEs are equal to 125% of the area median home price, as compared to the previous limits of 100% of the national median for GSEs and 95% of the local area median for FHA.
  • For FHA, limits went up nationwide – with the bottom limit rising from $200,160 to $271,050 and the cap in high cost areas rising from $362,790 to $729,750.
  • For GSE limits, 26 states and the District of Columbia today have communities with limits over $417,000 (the regular GSE limit) -- more than 240 communities in total.
  • States with loan limits above $417,000 - AZ, CA, CO, CT, DE, FL, GA, ID, MA, MD, NC, NH, NJ, NM, NV, NY, OH, OR, PA, RI, TN, UT, VA, WA, WV, WY.
  • According to our estimates, permanent limits would enable more than 500,000 borrowers with loans above $417,000 to refinance to lower interest rates. 
  • We estimate that a permanent increase in the loan limits could mean as many as 350,000 additional home sales, lower inventories, and a 2 to 3 percent increase in home prices next year.
  • We estimate that a boost in home prices could reduce the number of foreclosures by as many as 210,000 by making it easier for consumers to refinance or sell.
  • The new limits have not been in effect long enough to have a substantial effect on the housing market. 

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    Status in Congress

    • H.R. 5140, the Economic Stimulus bill, which made temporary increases in the loan limits, passed the House by a vote of 380-34, and the Senate by a vote of 81-16. The President signed the bill in February.
    • H.R. 3221 passed the Senate by a vote of 84-12 in April.  The Senate version of this bill did not include GSE loan limits and only increased the FHA loan limits to $550,440.
    • H.R. 3221 passed the House by a vote of 266-154 in May.  Their version of the bill would make the Economic Stimulus legislation loan limit increases permanent.
    • The Senate Banking Committee passed a GSE reform bill in May by a vote of 19-2.  This bill would increase the GSE loan limits to only $550,440. 
    • It is expected that the House and Senate will conference on H.R. 3221, including all the provisions.  We strongly urge the Senate to accept the House language on the higher loan limits.