Even as Congress slowly debates how to reform the secondary mortgage market, credit union mortgage lenders in states with higher home prices face a significant deadline on Oct. 1.
Unless Congress acts, conforming loan limits on loans backed the Federal Housing Administration and purchased by Fannie Mae and Freddie Mac will fall from their current cap of more than $729,000 to $417,000 for most of the country that day.
Congress raised the limit in February 2008, as part of the economic stimulus package, allowing the FHA, Fannie Mae and Freddie Mac to guarantee more loans at a time when private capital was tight.
Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively affecting housing affordability, according to the California Association of Realtors, which supports renewing the cap.
“By reducing the conforming loan limit, thousands of California home buyers will be shut out of homeownership,” said CAR President Beth L. Peerce.
“The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery,” Peerce said. “We urge Congress to maintain the current limits and make them permanent to provide homeowners and home buyers with affordable financing and help stabilize local housing markets.”