House Committee Approves Extension of High-Cost Loan Limit

The House Appropriations Committee has voted to extend the $729,750 limit for federal loans in high-cost markets through September 2010.
The loan limit applies to mortgages financed through Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) and is currently set to revert back to $417,000 at the end of this year unless the extension is approved by Congress.
Lawmakers temporarily raised the limit in 2008 as the secondary mortgage market began to shrink, to give the GSEs’ and FHA more flexibility to support homeownership in high-cost areas, such as San Jose, California, Key West, Florida, and Honolulu, Hawaii, as well as many other designated metros.
In addition, the House bill would allocate another $70 million to fund pre-purchase counseling for new homebuyers and families at-risk of foreclosure.
It would also authorize FHA to insure $400 billion in single-family loans during its fiscal year 2010, up from $315 billion in the 2009 fiscal year, which ends September 30. And it would reduce the principal amount a senior can receive on a reverse mortgage through FHA’s Home Equity Conversion Mortgage (HECM) program.
The committee’s proposal would allow Ginnie Mae to guarantee up to $500 billion in mortgage securities backed by both single-family and multi-family loans. During the current year, Congress sanctioned the agency for $400 billion in MBS guarantees.