McNerney Introduces Bipartisan Bill to Make Permanent New Limits for FHA, Fannie, Freddie

Press Release

Today, Congressman Jerry McNerney (CA-11) introduced landmark bipartisan legislation to permanently increase the loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration.

The bill, H.R. 5958, the Housing Opportunity Act of 2008, is cosponsored by Congressman Gary Miller (R, CA-42).

"Just open up the newspaper or turn on the television anywhere in the country and it's hard to avoid news of the foreclosure crisis, especially in Stockton and San Joaquin County. The number of foreclosures is startling and serves as an indication of the hardships many families are facing, including losing their homes," Rep. McNerney said. "We're just now beginning to feel the impact of the foreclosure crisis ripple through all sectors of the economy. We've got to do more to help families in financial difficulty and to stabilize the market."

The Economic Stimulus Act that was signed into law last February included temporary increases in loan limits for the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac, and the Federal Housing Administration (FHA). During consideration of that legislation, Rep. McNerney raised the need to increase the loan limits directly with Speaker Pelosi.

"We took an important step in injecting stability and liquidity into a turbulent market by temporarily increasing the loan limits that were too low to be of any use in California," Rep. McNerney said. "Now Congress should help stabilize the market and provide fiscally responsible relief to American families by making permanent the increase in those loan limits."

H.R. 5958 will ensure that the maximum limits of $729,750 are maintained, opening responsible mortgage opportunities for families to obtain fixed-rate mortgages and help alleviate the current market difficulties. The bill will mean an expansion in loan limits and access to stable mortgage products in all four counties in the 11th district: Alameda, Contra Costa, San Joaquin and Santa Clara.

If Congress does not act, the FHA loan limit will revert back to $362,790, well below the median home price in the four counties. Additionally, the GSE conforming loan limit will fall to $417,000 at the end of the year.

Established in 1934, the FHA provides mortgage insurance for prospective homebuyers. Fannie Mae and Freddie Mac purchase mortgage loans from lenders, providing lenders with the capital they need to make additional home loans. Both entities, however, are barred by law from insuring or purchasing loans above a certain size.

Californians already face home prices substantially higher than the national average. In 2007, the median home in California cost $558,100 and today in many parts of Northern California it is substantially higher.

Making permanent the increase in conforming loan limits will offer substantial benefits by increasing the availability of credit in the housing market.

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