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The battle to extend the loan ceiling for the Federal Housing Association and government-sponsored lenders like the much-maligned Fannie Mae and Freddie Mac waged on Tuesday, as lobbyists urged the House of Representatives to get a move on and vote already. “It’s important for us to get these loan limits restored so we can provide certainty for a housing market that is struggling to regain its footing,” said Jim Tobin, chief lobbyist for the National Association of Home Builders.
It’s been more than a month since the increased federal home loan limits expired Sept. 30. Since then, the Senate overwhelmingly voted in favour of another two-year extension, which would grant lenders freedom to loan homebuyers as much as $729,050—up from the current cap at $625,000.
Put plainly, an extension would give owners of pricier pads a better shot at selling off their homes because potential homebuyers could secure higher loans.
But the proposal is stalled in the House, where Republicans have so far refused to budge on their pledge to cut off taxpayer support for Fannie Mae and Freddie Mac. The lenders are largely blamed for the risky lending practices that triggered the housing crisis and are still accountable for more than 95 per cent of all lending in the housing market.
“A lot of [Republicans] aren’t showing their cards,” Tobin said. “We’ve had conversations with a variety of people and the jury is certainly still out on how this is going to go.”
The NAHB’s stance is that keeping the loan ceiling low for now would prove detrimental to homeowners in highly concentrated and pricier housing markets, he said. They’d have to find other sources for lending and could stand to pay much higher interest rates.
“This is putting enormous downward pressure on prices across the country,” Tobin said. “Homebuyers are going to have trouble selling their homes or purchasing homes because of the smaller loan limits.”
And until private lenders get back on their feet—which isn’t looking all that likely—government-backed lenders like the FHA and Fannie and Freddie are all homeowners have got.
The NAHB estimates more than half of all owner-occupied homes reside in counties that would be imapcted if the loan limit is decreased. But it’s too soon to predict the total impact on the housing market, Tobin said.