The nominee to run the Federal Housing Administration (FHA) Thursday said she opposes extending higher limits on federally-insured loans.

At her nomination hearing, Carol Galante, now the acting FHA commissioner, said she agrees with other administration officials that letting the higher limits expire is better for the recovery of the private mortgage market.

"It is appropriate to take a step back," she told members of the Senate Banking Committee.

In recent months, the conforming loan limits for the FHA, Fannie Mae and Freddie Mac have been at the center of a legislative battle. The Obama administration and many House Republicans supported letting a temporary increase in the limit expire Sept. 30. The limit fell back from $729,750 on a home purchase to $625,000.

But many congressional Democrats and a smaller group of Republicans pushed for another extension. They succeeded in adding a provision to a Senate appropriations bill to continue the higher limit until the end of 2013.

This week, House and Senate negotiators reached a deal that would raise the FHA's loan limit until the end of 2013, but would not raise the limits for Fannie and Freddie.

The compromise legislation, which is part of a larger appropriations bill, is expected to pass both the House and the Senate by the end of the week. Then, despite the Obama administration's stated opposition to the higher loan limits, President Obama is expected to sign the bill into law.

Nonetheless, Galante reiterated the administration's position that lowering the limits would be a step toward ensuring that private capital returns to the housing market.

"We understand that the FHA is playing an outsized role in the market," she said. "We do understand that the markets are fragile and there are reasonable people who want us to stay in this business. We will implement whatever Congress wants us to."

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