Mortgage bankers soon will be able to originate Federal Housing Administration (FHA) loans of up to $729,750 in high cost areas thanks to Congress, which passed a "minibus" appropriations bill Thursday night.
But Fannie Mae and Freddie Mac lenders will be stuck at the lower $625,500 limit.
President Obama is expected to sign the combined Transportation, Housing and Agriculture minibus measure shortly.
House and Senate conferees hammered out this strange FY 2012 compromise under heavy lobbying from housing-related groups – in particular the National Association of Realtors. In the end, House conferees refused to raise the limit for the GSEs, whose seller/servicers began adapting to the lower loan limit in late September.
The spending bill (H.R. 2112) also extends the National Flood Insurance Program through Dec.16 and provides $80 million for foreclosure prevention programs.
The House passed the appropriations bill by a 298-212 vote Thursday and the Senate passed it by a 70-30 vote later that night.
Sen. Bob Corker, R-Tenn., voted against the measure. "It is unconscionable that Congress would renew the excessive loan limits for any of the government housing agencies when we should be weaning ourselves off government dependence in the housing finance sector," Sen. Corker said.
The banking committee member recently introduced a bill to unwind Fannie and Freddie over 10 years.
National Association of Home Builders chairman Bob Nielson said restoration of the higher loan limits for FHA is "essential to help stabilize the nation's housing financial markets."
The minibus appropriations bill also restores the FHA loan limit in hundreds of counties by raising the local benchmark to 125% of the median house price from 115%. The benchmark in these low cost markets dropped to 115% at the end of September.
The National Association of Realtors, as expected, welcomed the outcome. "As the nation's leading advocate for homeownership, we applaud members of Congress for restoring FHA's previous loan limits, which will help reduce consumer cost burdens, stabilize local housing markets and allow qualified, creditworthy borrowers to access affordable mortgage financing," said NAR President Moe Veissi.