While the House of Representatives' $146 billion fiscal stimulus package includes a plan to temporarily raise the conforming loan limits for Fannie Mae and Freddie Mac, the Senate will likely not follow suit.
The House voted by an overwhelming 385 to 85 margin to pass the stimulus package on Jan. 29, but the Senate had not yet voted on a proposed $160.5 billion plan as of press time last Tuesday. The House's stimulus package raises the maximum size of mortgages that can be bought by two GSEs to $417,000 and $729,750, depending on a state's average price of homes.
The boost to the conforming loan limits will expire at the end of the year. The House's package also increases the size of the Federal Housing Administration-backed loans to as much as $729,750 from $362,790 until the end of the year.
The Securities Industry and Financial Market's Association (SIFMA) met on Jan. 25 to discuss TBA eligibility of the larger loans, but did not reach a decision.
According to a note from Deutsche Bank Securities, which had representatives at that meeting, SIFMA MBS members will meet with senior officials at Fannie, Freddie, Ginnie Mae and the Office of Federal Housing Enterprise Oversight (OFHEO) to discuss pooling alternatives and the impact on borrowers and investors.
In a statement before the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday, Sen. Christopher Dodd (D-Conn.) called for a comprehensive FHA reform measure but also expressed support for the House's temporary increase of loan limits.
"Increasing these loan limits will help restore confidence and liquidity into the housing market, where interest rates have skyrocketed for non-conforming loans due to the current problems," he said.
But James Lockhart, director of the OFHEO, argued that the temporary measure did not provide a long-term solution. "We are very disappointed in the proposal to increase the conforming loan limit, as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform," Lockhart said in a statement. "To restore confidence in the markets, we must ensure that the GSEs' regulator has all the necessary safety and soundness tools."
According to a published report, the American Securitization Forum (ASF) is pushing for a loosening of the FHASecure requirements so that fixed-rate borrowers would also be eligible for inclusion. But the ASF released a statement on Jan. 29 indicating that it has not yet advocated for any reform proposal.
"The American Securitization Forum supports responsible expansion of FHA and other sustainable refinancing opportunities," the statement read. "While we are discussing a number of ideas with our members, we have not endorsed any specific proposals as yet."
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