Lobbying Fight Intensifies Over Limits For US-Backed Mortgages
November 04 2011 - 04:46PM
Dow Jones News
Influential housing and banking industry lobbying groups are
clashing on Capitol Hill over whether to restore higher limits on
the size of government-backed mortgage loans.
The lobbying battle pits real-estate agents against mortgage
insurers and even has banking groups on opposite sides. It comes as
House and Senate negotiators prepare in the coming weeks to
negotiate the details of a bill to fund several federal agencies
through next September.
Senate lawmakers want the final bill to include a measure
lifting the loan limits, which fell to $625,500 on Oct. 1 in
expensive markets such as New York and San Francisco from $729,750.
Under the Senate's version of the bill, the higher limits would be
restored until the end of 2013.
Powerful Republican lawmakers in the House favor keeping those
limits at their current levels. Other Republicans, however,
including several from California and New York, want to raise
them.
The debate highlights a key question about whether the main goal
of housing policy should be to support the weak sector or at least
do no harm to it. Others, including many Republicans, argue that
the top priority should be reducing the federal government's
footprint in the $10.4 trillion U.S. mortgage market, given that
the federal government stands behind more than nine in 10 new
loans.
The loan limits vary by location, based on local home prices in
a particular area. They have fallen to as low as $271,050 in some
areas for loans backed by the Federal Housing Administration, which
guarantees loans with down payments as low as 3.5%. Limits for
loans backed by Fannie Mae (FNMA) and Freddie Mac (FMCC) can fall
to as low as $417,000.
The National Association of Realtors is the leading group
marshalling forces to get the loan limits restored. Its allies
include groups representing title agents, credit unions, home
builders and mortgage bankers. The Realtors group is a big player
on Capitol Hill, having spent $17.6 million on lobbying last year,
according to the Center for Responsive Politics.
Ron Phipps, the trade group's president and a Realtor from
Warwick, R.I., said in an interview Friday that he is hearing from
agents around the country who are concerned about the drop in loan
limits.
The change, he said, has reduced the amount of money potential
home buyers can borrow in nearly 660 counties in 42 states. That
has forced home buyers to look for cheaper homes or drop out of the
market entirely. The change is having the biggest impact in lower
price ranges, rather than in high-cost areas, he said.
"We look to prevail and we expect to prevail," Phipps said. "We
are working diligently to relay the message for American home
buyers and home owners in a big way."
Mortgage insurers, however, are pressing to maintain the current
limits. Those companies allow borrowers to take out mortgages with
down payments of less than 20%.
Borrowers pay premiums and the mortgage insurers absorb some of
the cost when borrowers default. The industry has lost market share
to the FHA after the housing bust, and is struggling with losses
from defaults and foreclosures.
The Mortgage Insurance Companies of America, which spent $4.1
million on lobbying last year, argues that restoring the higher
loan limits would prevent private investment from returning to the
U.S. housing market, a goal of both Democrats and Republicans.
Lifting the loan limits, the group argues, will push borrowers
back into FHA-backed loans, with taxpayers holding 100% of the
risk.
"This is a very small rollback," in loan limits, said Teresa
Bryce Bazemore, president of Radian Group Inc.'s (RDN)
mortgage-insurance business and president of the industry trade
group. Even after the decline in loan limits, "given the fact that
home prices have fallen, most borrowers would still qualify for an
FHA loan," she said.
Banking groups are divided on the issue. While the Mortgage
Bankers Association favors raising the loan limits, the American
Bankers Association is opposed to such a move.
"Higher loan limits have done little to increase demand or
prevent home prices from falling," wrote Floyd Stoner, American
Bankers Association's top lobbyist, in a letter to lawmakers this
week. "Private capital must return to housing finance if we are
ever going to reform the system and take the taxpayer off the hook
for the guarantee of virtually every mortgage made."
-By Alan Zibel, Dow Jones Newswires; 202-862-9263;
alan.zibel@dowjones.com
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