Mortgage, housing, and even local politicians are stepping up pressure on congressional appropriators to extend the maximum $729,750 loan limit on government-backed loans for another year, fearing that a failure to act will damage already stressed real estate markets.

Industry trade groups report that some large lenders have already stopped making high balance loans above $625,500, which will become the maximum limit on October 1 if Congress does not pass an extension.

Mortgage bankers, Realtors and others say lenders will stop making the higher balance loans by mid-August because they fear getting stuck with paper that soon will be ineligible for sale to Fannie Mae, Freddie Mac, and Ginnie Mae securitizers.

This will halt "some homes sales, and will greatly curtail lending in many communities," according to a joint letter sent to House and Senate appropriators on Friday.

Fifteen housing industry groups, including lenders, Realtors, builders as well as the National League of Cities and U.S. Conference of Mayors signed the joint letter.

The Obama administration and many Republican leaders support a reduction in GSE loan limits as a way to diminish Fannie and Freddie’s grip on the mortgage market. However, that view may be changing, at least in regards to the White House.  On Friday, Rep. Barney Frank, D-Mass., said he believes the Obama administration will reverse course and support an extension of the maximum loan limit, according to one wire report.

The ranking Democratic on the House Financial Services Committee said there is a "real chance" Congress will pass an extension.

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