Home-loan borrowers will once again be able to get federally-guaranteed loans of up to $729,750 on Long Island -- but only from the Federal Housing Administration.
The new law that funds five federal departments, including the Department of Housing and Urban Development, did not extend the higher limit, which had expired Oct. 1, to loans guaranteed by mortgage finance giants Fannie Mae and Freddie Mac.
President Barack Obama on Friday signed the measure after the final congressional vote on Thursday. The Federal Housing Administration extension expires Dec. 31, 2013.
Republicans in the House had stripped the extension for Fannie and Freddie, which are overseen by the Federal Housing Finance Agency.
The report from House and Senate negotiators on the bill cited the two agencies’ “questionable business practices” and “extravagant management bonuses.” The finance agency’s acting director, Edward J. DeMarco, had defended millions of dollars in pay for Fannie and Freddie executives, saying “competent executives” were needed during these challenging times.
But congressional negotiators said they allowed the extension for FHA loans because it is subject to “greater congressional scrutiny.”
The federally-guaranteed loan limit was raised from $625,500 in 2008 as a temporary measure to give the housing market a boost. Federally-guaranteed loans are less risky for investors, and when lenders sell these loans on Wall Street, this frees up capital for the lenders to lend again.
But as the loan limit was due to expire Oct. 1, supporters called for another extension because the housing market was still weak, while opponents saw it as a subsidy for the rich to buy expensive homes. Anything over the limit is considered a “jumbo loan,” which usually carries higher interest rates and down payments.
Rep. Gary Ackerman (D-Roslyn Heights), who helped lead the charge to extend the limits, fired back at Republicans in a Friday statement: “By not fully restoring the loan limits, they have deprived a large portion of the housing market of its main source of liquidity in the middle of the most catastrophic housing crisis since the Great Depression.”
He said he would push legislation to give Fannie and Freddie the higher loan limits.