For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans. With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree.
But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.
Without a third extension, “super conforming” loan limits up to $729,750 in San Francisco will expire at the end of September. And while President Obama signed the extension last year, it’s unlikely he would do so again even if Congress were to pass a bill.
A Federal Housing Administration spokeswoman declined to comment but pointed to the Obama administration’s position paper on reforming the housing market. “Larger loans for more expensive homes will once again be funded only through the private market,” it declares.
∙ Federal Retreat on Bigger Loans Rattles Housing [New York Times]
∙ If Lowering Rates Isn’t Working, Perhaps Increasing Limits Will [SocketSite]
∙ Another Year For Super Conforming Limits (Assuming Obama Signs) [SocketSite]