A coalition of industry groups is urging Congress to act quickly to maintain the GSE loan limit at $729,750, saying the pending expiration is hurting both home sales and application volume.
The loan limit will drop to $625,500 on Oct. 1 unless Congress passes an extension.
The coalition claims the approaching expiration has already halted some home sales and several large lenders have stopped accepting applications for higher balance loans. "Housing markets remain fragile and cannot handle a mortgage disruption like lower loan limits," according to a Sept. 6 letter to Congress.
Mortgage bankers, home builders, Realtors, appraisers, title companies, mayors and some banks support a two-year extension. But not all bank trade associations have joined the coalition. Opponents claim an extension isn't needed and the private sector will step in to fill a niche currently served by Fannie Mae, Freddie Mac and the Federal Housing Administration.
In 2010, lenders originated $30 billion of loans with balances of greater than $625,500 and up to $729,750, representing about 2% of industry-wide originations.
Supporters of an extension are concerned that private conduits, megabanks and regional depositories that want to portfolio jumbo loans will not fill the gap.
Senators Robert Menendez, D-N.J., Diane Feinstein, D-Calif., and Johnny Isakson, R-Ga., have introduced a bill (S. 1508) to extend the $729,750 loan limit extension for two more years.
Reps. John Campbell, R-Calif., and Gary Ackerman, D-N.Y., have introduced similar legislation (H.R. 2508) in the House.