House and Senate Democrats have worked out an economic stimulus package with the president that includes an increase to conforming and government loan limits.
The package was announced by President Bush Thursday.
"This agreement was the result of intensive discussions, many phone calls, late-night meetings, and the kind of cooperation that some predicted was not possible here in Washington," President Bush said in a statement issued by the White House. "It also required patience, determination, and good will on all sides."
House Speaker Nancy Pelosi is calling for the conforming limit on government sponsored enterprises purchases to be raised to $729,750 for one year, according to a statement from her office yesterday. She is also proposing that FHA loans limits be raised permanently to 729,750.
The increase in the conforming limit, the maximum loan amount that can be purchased by either Fannie Mae or Freddie Mac, would be effective until Dec. 31, 2008, according to a transcript of Treasury Secretary Henry Paulson issued by the White House Thursday. He noted, however, that he didn't support the increase.
"I got run down by a bipartisan steamroller," Paulson stated. "I mean, Republicans and Democrats reunited on this, because I have said -- and I think I was one of the first people to say it would be very helpful to raise the loan limit for the GSEs for a temporary period of time, given what's going on in that market."
House Republican Leader John Boehner issued a statement proposing the limit on loans insured by the Federal Housing Administration be raised to $725,000. He is calling for the limit on mortgages purchased by Fannie and Freddie to be boosted to $625,000.
The stimulus package was an important stop toward restoring stability to the housing and mortgage markets, the Mortgage Bankers Association said in an announcement yesterday. The increase in loan limits would return liquidity to a sector of the mortgage market that froze up in August. The increases will be especially helpful to real estate markets that have had the biggest run ups and are now facing the most difficulty.
But Fannie and Freddie's regulator, the Office of Federal Housing Enterprise Oversight, was not happy about the proposed hikes for the GSEs.
OFHEO Director James B. Lockhart indicated in a statement Thursday the agency's disappointment with the proposal, noting it is a mistake to raise GSE limits before ensuring that his agency has necessary safety and soundness tools.
Lockhart did say, however, OFHEO will work with Fannie and Freddie to ensure any increases are quickly processed through their rigorous new product approval process and that appropriate risk management policies and capital are in place.
Senate Democratic leaders also weighed in.
"In an effort to get the bipartisan process moving in the Senate, Finance Committee Chairman Baucus and Ranking Member Grassley will conduct a markup of stimulus proposals next week," Senate Majority Leader Harry Reid said in his own statement. "I expect that the Committee and other Senators will work to improve the House package by adding funds for other initiatives that can boost the economy immediately."