An early draft of a stop-gap funding resolution shows that Congress is headed toward passing a nine-month extension of the maximum $729,750 loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) loans in high-cost areas.

The draft summary of the continuing resolution shows the loan limit extension is still in play. But the CR is not expected to be finalized until Wednesday afternoon.

With Congress set to recess this week for the November elections, party leaders want to pass the CR quickly to fund government operations through Dec. 3.

The maximum $729,750 loan limit is due to expire at the end of this year and the draft CR proposes to extend it until September 30, 2011. Without an extension, the maximum loan limit would drop down to $625,000.

Industry groups like the Mortgage Bankers Association have been pushing for the loan limit extension now to prevent disruptions in the mortgage market. Waiting for Congress to return in November would make it difficult for lenders to make loan commitments and keep credit flowing for jumbo loans between $625,000 and $729,750.

Meanwhile in other GSE news,  Fannie issued $48 billion of MBS in August, a 12% increase from July with the GSE also reporting improving delinquency numbers.

The government managed mortgage giant, not surprisingly, is benefiting from an increase in refinancings. Fannie's August report shows monthly MBS issuance has risen 32% since May.
The GSE said the serious delinquency rate on its guaranteed single-family mortgages fell to 4.82% in August. Five months ago, 5.47% of Fannie loans were 90 days or more past due.

Freddie recently reported that its serious delinquency rate has fallen for three consecutive months, and now stands at 3.83%.

Meanwhile, the FHA is experiencing an increase in delinquencies. FHA's serious delinquency rate (90 days or more past due) fell to 8.3% in June and then rose to 8.6% in July, after an upward revision by the agency. In August the delinquency rate edged down to 8.5%.

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