Oct. 1 the Day of Defeat for Federal Loan Limits

by Chicago Agent

Federal loan limit increases are set to expire on Oct. 1, a move that may endanger housing.

Despite efforts by politicians and housing professionals, federal housing limits will likely decrease on Oct. 1, a development that could hamper homeownership in some markets.

The limit to loans by Fannie Mae, Freddie Mac and the Federal Housing Authority was raised to $729,750 in 2008 in answer to the strict lending policies that many banks pursued following the Sept. 2008 collapse of investment bank Lehman Brothers.

On Oct. 1, though, the limit will revert back to its normal $625,500, endangering some housing prospects in the more expensive markets of the East and West coasts. With less government financing available, some analysts fear that home prices could decrease even further, as potential homebuyers shy away from ownership in the face of higher down payments.

According to Standard & Poor’s, 110,000 mortgages, or 2 percent of the jumbo loan market, are between the $625,500 and $729,750 limits.

Bills were drawn in both the Senate and the House, but neither made it to a vote. Lawmakers had been attempting to attach the limit extension to a short-term spending bill, but were unsuccessful in their efforts.

A spokesperson for John Campbell, a Republican representative from California, said the extension could be extended by the end of the year.

“We are focusing all of our effort and attention on making sure that a temporary extension of the current conforming loan limits is included in an omnibus spending bill that it appears the House and Senate will consider late this year,” Campbell’s spokesman said.

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