Permanent Loan Limit Increase would be good for Homeownership, Says NAR

WASHINGTON, May 22, 2008
Making the temporary loan limit increases authorized by the Economic Stimulus Act of 2008 permanent will give families in high-cost areas equal access to fair and affordable loans on a continuous basis, according to the National Association of Realtors®.
“Congress created Fannie Mae and Freddie Mac to provide liquidity and stability to the mortgage markets. Making the Economic Stimulus Act limits permanent will significantly boost home buyer, lender and investor confidence and will bring more families in high-cost areas back to the marketplace with greater access to affordable financing,” said Realtor® Vince Malta, Chair of NAR’s Public Policy Coordinating Committee, in testimony before the House Financial Services Committee today. “This will also make more affordable interest rates available for families regardless of where they live because of the added liquidity to the mortgage market. We believe the result will be additional sales, lower inventories, and stronger home prices.”
Research studies have found that home prices have the biggest impact on foreclosures, and that strengthening and stabilizing home prices would reduce foreclosures.
“While jumbo mortgages were once associated with luxury housing, today every region of the country has areas that qualify for jumbo conforming loans,” said Malta. NAR estimates that adopting permanent high-cost area limits of 125 percent of the local median home sales price, up to $729,750, will allow more than 500,000 homeowners to refinance into lower interest rate loans every year, helping to reduce foreclosures by as many as 210,000. Additionally, this would generate over $35 billion in increased economic activity, strengthen home prices by 2 to 3 percent, increase home sales by up to 350,000 and save homeowners up to $600 per month.
“For all of these reasons, NAR urges Congress to make the Economic Stimulus Act loan limit increases permanent. Doing so is the right move for the nation’s housing markets and economy and is a matter of simple equity for American families residing in higher cost areas. Stability is what we are after and stability is what this action would provide,” Malta said.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.