Builders Press for Reprieve as Loan Limits Expire

By Clea Benson

There’s at least one economic policy issue on which Federal Reserve Chairman Ben S. Bernanke, President Barack Obama, and Republican leaders in the U.S. House of Representatives agree: All say it’s time for the federal government to begin scaling back the size of home mortgages it buys or insures. That’s scheduled to happen on Oct. 1, when limits on loans backed by the Federal Housing Administration and government- controlled mortgage finance companies Fannie Mae and Freddie Mac will drop from the record highs set in the aftermath of the 2008 financial crisis. In high-cost areas, the cap will fall from $729,750 to $625,500. Still, even with the political momentum strongly against them, real estate agents and homebuilders are pressing for a last-minute reprieve, setting the stage for a renewed debate on Capitol Hill about whether reducing government backing for loans will destabilize an already weakened market. Government Guarantee – “Given what has happened to falling home prices, you’re really aggravating the situation,” said Basil Petrou, managing partner of Washington-based Federal Financial Analytics Inc. “It’s a 100 percent government guarantee, with all the problems that generates, applied to a family that can afford a mortgage which is significantly higher than what the average person in their area can afford.”

http://www.bloomberg.com/news/2011-09-13/homebuilders-press-for-reprieve-as-higher-loan-limits-expire.html

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