Despite intense opposition, home builders and Realtors were successful in their lobbying efforts to pass legislation that keeps the government insuring jumbo mortgages. The bill is especially beneficial to homeowners and Realtors in California. As a result of the legislation, the Government National Mortgage Association is expected increase market share.
On Friday, President Obama signed into law H.R. 2112, Consolidated and Further Continuing Appropriations Act, 2012. Obama has been in Asia for the past week and was in Bali the day the bill was signed.
The legislation was passed by the House on Thursday, and the Senate quickly followed suit.
The bill is known as a minibus appropriations measure because it contains multiple appropriations bills.
The legislation includes a “continuing resolution” to carry on federal operations until Dec. 16 or until Congress completes the remaining nine fiscal-year 2012 appropriations bills. This includes an extension of funding for the National Flood Insurance Program.
The new law additionally includes a provision to extend higher limits on loans insured by Federal Housing Administration. Higher limits that were previously established through the Economic Stimulus Act of 2008 expired on Oct. 1.
Under the new legislation, the $729,750 FHA loan limit in high-cost areas has been extended until Dec. 31, 2013.
The National Association of Home Builders said that its own extensive lobbying efforts helped the bill pass despite “intense opposition from conservative forces in the House of Representatives who refused to support any measure that could be perceived as increasing the federal government’s role in housing.”
Among those who opposed the bill was Sen. Bob Corker (R-Tenn.)
“It is unconscionable that Congress would renew excessive loan limits for any of the government housing agencies when we should be weaning ourselves off of government dependence in the housing finance sector,” Corker said in a statement. “And to tack it on to an appropriations conference report that spends too much and includes a continuing resolution necessary for keeping the federal government open further erodes the limited confidence the American people have in Congress.”
One of the legislators on the other side of the issue was Rep. Brad Sherman (D-Calif.), who called the higher FHAÂ limits “critical to supporting current housing prices and our overall economic recovery.” Sherman, who wants to make the higher limits permanent, claims that the legislation will help prevent a collapse of housing prices in markets like Los Angeles.
California is likely to be one of the biggest beneficiaries of the extended high-cost limits, and the California Association of Realtors was happy with the passage of the bill.
“C.A.R. is pleased the Senate and House were able to come to a reasonable compromise on extending the FHA loan limit to ensure affordable home financing for middle-class buyers,” C.A.R. President LeFrancis Arnold said in a statement Friday.
But Arnold said that the group was disappointed that higher limits at Fannie Mae and Freddie Mac weren’t also reinstated.
Sen. Corker warns that raising the FHA while leaving lower limits in place at Fannie and Freddie will only drive more business to Ginnie Mae while putting FHAÂ at great risk of loss to taxpayers. In addition, it will delay the re-entry of the private sector into the MBS market for years.
Realtors, who receive huge commissions and are supposed to be the local experts on real estate, largely escaped any blame for putting buyers into homes at inflated values in the years leading up to the housing market collapse. The sector has lobbied hard for any legislation that props up home sales, and it is rarely on the side of any measures that might have a negative effect on sales for real estate agents and brokers.
The National Association of Realtors claims that the higher FHAÂ limits will be a boost for “hard-working, middle-class families” and that almost two-thirds of buyers impacted by the higher limits earn less than $100,000.
“It’s a misconception that only wealthy borrowers benefit from the maximum cost loan limits; middle-class homebuyers living in all areas of the country deserve the same access to affordable mortgage financing and the same opportunity to achieve homeownership that homebuyers enjoy in the most affordable regions of the country,” NAR President Moe Veissi said in a statement Friday. “The legislative action will have an impact even in communities with loan limits well below the maximum cap; the reset last month impacted 669 counties in 42 states and territories, with an average loan limit reduction of more than $68,000.”
The legislation was passed the same week FHA reported that the capital ratio on the Mutual Mortgage Insurance Fund had fallen to a dangerously low level of 0.24 percent. Congress has mandated that the ratio must be at least 2.00 percent.
FHA hopes it will return to a 2 percent ratio by 2014, though that timeline assumes no further hiccups in the housing market.
