A Long Island congressman has introduced a bill that would allow the federal government to keep insuring loans of up to $729,750, key to high-cost housing areas such as Long Island.
That loan limit expires Oct. 1 and would revert to $625,500, but Rep. Gary Ackerman (D-Roslyn Heights) wants to extend the limit to Oct. 1, 2013.
The insured loan limit used to be $417,000 for Fannie Mae and Freddie Mac and $362,000 for the Federal Housing Administration, but after the subprime lending market collapsed in 2007, Congress and then-President George W. Bush in 2008 temporarily raised the limit to stabilize the housing market.
Because the federal government insures the loans, borrowers can get lower interest rates. Everything under that loan limit is what is known as a “conventional” loan. Anything above is considered a jumbo loan, which carry higher rates.
“The housing market does not need a self-inflicted wound,” said Ackerman, who introduced the bill last week with Rep. John Campbell, a Republican from California. “With the economy remaining fragile and the local housing sector still struggling to recover, now is not the time to make the cost of mortgages more expensive. Reducing the conforming loan limit would hurt home values, increase the cost of down payments and interest rates, and shut prospective buyers out of home ownership creating a burden for potential buyers and sellers.”
The Conforming Loan Limits Extension Act was referred to the House Committee on Financial Services, which is expected to hold a hearing on the proposal. The higher loan limit affects 669 counties in 42 states.
There is no companion bill in the Senate.