Even as Congress slowly debates how to reform the secondarymortgage market, credit union mortgage lenders in states withhigher home prices face a significant deadline on Oct. 1.

Unless Congress acts, conforming loan limits on loans backed theFederal Housing Administration and purchased by Fannie Mae andFreddie Mac will fall from their current cap of more than $729,000to $417,000 for most of the country that day.

Congress raised the limit in February 2008, as part of theeconomic stimulus package, allowing the FHA, Fannie Mae and FreddieMac to guarantee more loans at a time when private capital wastight.

Non-conforming or jumbo loans typically carry a higher mortgageinterest rate than a conforming loan and require a higher downpayment, increasing the monthly payment and negatively affectinghousing affordability, according to the California Association ofRealtors, which supports renewing the cap.

“By reducing the conforming loan limit, thousands of Californiahome buyers will be shut out of homeownership,” said CAR PresidentBeth L. Peerce.

“The higher mortgage loan limits are critical to providingliquidity in today's housing market and are essential to ourhousing recovery,” Peerce said. “We urge Congress to maintain thecurrent limits and make them permanent to provide homeowners andhome buyers with affordable financing and help stabilize localhousing markets.”