Loan Limits - Contact Your Senator Today!

Posted by Joe Manausa on Thursday, June 12th, 2008 at 10:13pm.

You might not be aware of an important decision that the United States Senate will be considering in the next few days. This decision will determine whether or not housing consumers will be able to get fair, safe and affordable mortgage credit, which
You might not be aware of an important decision that the United States Senate will be considering in the next few days. This decision will determine whether or not housing consumers will be able to get fair, safe and affordable mortgage credit, which of course is a major part of the health of the national housing market. Current loan limit increases for FHA, Freddie Mac, and Fannie Mae are due to expire at year's end. There is a major push by many groups to make these loan limits permanent in order to restore investor confidence and stabilize mortgage markets and the entire economy as well. While this is definitely national news, it also hits us close to home in the Tallahassee real estate market. You see, many Tallahasseans have relied on these government insured loans over the past twenty years (and longer, but before my time...). Except for the boom market years of 2004-2006, these were the typical loan programs that we saw utilized in our sales in the Tallahassee real estate market. So, what can you do? Send a letter to your Senators. The House of Representatives has already voted to do so, but the Senate has reduced the maximum limit in its bill. Our economy is heavily tied to the housing market and we need to follow the lead of the House of Representatives. How Do You Do IT? Follow this link and fill out your name and address. It will generate a letter and email it for you if you wish, or allow you to modify it and print it for snail mail. It takes less than a minute and you'll be doing your part to maintain your own home's value. The Senate needs to keep the higher loan limits in place for 2009 and beyond.

Here are the letters that I have sent to Senator Bill Nelson and Senator Mel Martinez.

June 12, 2008 07:50 PM

Senator Bill Nelson
U.S. Senate
716 Hart Senate Office Building
Washington, DC 20510-0001
Subject: Make Higher Loan Limits Permanent for FHA, Freddie Mac & Fannie Mae Dear Senator Nelson, As your constituent and a REALTOR, I urge you, as a Member of the Senate, to support making permanent the FHA, Fannie Mae and Freddie Mac loan limits in the bipartisan Economic Stimulus Act, signed by President Bush last February. The legislation raised the maximum loan limits in high cost areas to $729,750 but it expires on December 31, 2008. The limits help homeowners in 240 counties in 26 states and can help get our national economy back on track. The House-passed housing stimulus bill, H.R. 3221, makes the $729,750 limits permanent. Senate bills cap the limits at $550,440. Our 1.2 million members applaud the progress the Senate has achieved, but strongly believe that the final bill must include the House bill's loan limits. The national mortgage market meltdown dramatically raised the cost and reduced the availability of mortgages in my market. Higher limits are helping to revitalize local housing markets, providing safe, fair and affordable mortgages for our state's homeowners. The limits are also helping to stabilize our entire economy. Higher limits simply reflect market realities in high cost areas. A lower limit unfairly penalizes citizens based simply on geography. Drastically reducing the temporary limits at year's end to the Senate cap of $550,440 will push our fragile housing and credit markets back into turmoil. We need permanent limits of $729,750 to stabilize our housing markets and help citizens of every state -- not just residents of high cost areas. Please support making the $729,750 loan limits permanent. Sincerely,
Joe Manausa
2138 Amanda Mae Court
Tallahassee, Florida 32312

Joe Manausa 2138 Amanda Mae Court , Tallahassee, Florida 32312

June 12, 2008 07:50 PM

Senator Mel Martinez
United States Senate
356 Russell Senate Office Building
Washington, DC 20510-0001
Subject: Make Higher Loan Limits Permanent for FHA, Freddie Mac & Fannie Mae Dear Senator Martinez, As your constituent and a REALTOR, I urge you, as a Member of the Senate, to support making permanent the FHA, Fannie Mae and Freddie Mac loan limits in the bipartisan Economic Stimulus Act, signed by President Bush last February. The legislation raised the maximum loan limits in high cost areas to $729,750 but it expires on December 31, 2008. The limits help homeowners in 240 counties in 26 states and can help get our national economy back on track. The House-passed housing stimulus bill, H.R. 3221, makes the $729,750 limits permanent. Senate bills cap the limits at $550,440. Our 1.2 million members applaud the progress the Senate has achieved, but strongly believe that the final bill must include the House bill's loan limits. The national mortgage market meltdown dramatically raised the cost and reduced the availability of mortgages in my market. Higher limits are helping to revitalize local housing markets, providing safe, fair and affordable mortgages for our state's homeowners. The limits are also helping to stabilize our entire economy. Higher limits simply reflect market realities in high cost areas. A lower limit unfairly penalizes citizens based simply on geography. Drastically reducing the temporary limits at year's end to the Senate cap of $550,440 will push our fragile housing and credit markets back into turmoil. We need permanent limits of $729,750 to stabilize our housing markets and help citizens of every state -- not just residents of high cost areas. Please support making the $729,750 loan limits permanent. Sincerely,
Joe Manausa
2138 Amanda Mae Court
Tallahassee, Florida 32312





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Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.

8 Responses to "Loan Limits - Contact Your Senator Today!"

Steve wrote: Sorry Joe, but I couldn't disagree with your more.

The limits should $417,000 and no more, regardless of area.

The whole purpose of the GSEs (Fannie Mae and Freddie Mac) was to make mortgages easily accessable to the middle class. They were never intended to provide mortgage for the rich -- and regardless of what you say, someone who takes out more than a $417,000 mortgage better be rich.

I certainly do not want my tax dollars to bail out the GSEs as the high-priced homes go into foreclosure.

I understand that increasing the limits will help property values and sales. However, it simply not right to ask the middle-class to assume the risk of loans that can only be afford by household earning more than $139,000 per year (based on the 3x household income rule).

Eventually, the credit markets will return to normal. With proper underwriting, Wall Street will once again start buying the non-conforming loans.

I would rather have Wall Street accept the risk of these big loans than taxpayers.

Posted on Friday, June 13th, 2008 at 1:16pm.

Joe Manausa wrote: Steve, you have an interesting viewpoint. I'm curious as to why you feel that the limits should be $417,000. Why not $418K?, why not $300K? Is this a magic number that you've determined is right for everyone "regardless of area?"

Posted on Monday, June 16th, 2008 at 9:22am.

Greg wrote: I agree with Steve. Haven't we learned our lesson that having the government artificially prop up home prices is awful public policy?

Regarding your response to Steve, the issue on the table is not the ideal limit, but whether the limit ought to be raised to 729K. The answer to that is clearly "no."

Posted on Monday, June 16th, 2008 at 11:57am.

Steve wrote: Joe,

As you know and as Greg pointed out, I said $417k because that is the current, standard conforming loan limits.

And, that number makes sense to me. At $417k, a household should have in excess of $139k in annual household salary in order to afford the loan.

I'm not exactaly sure what percentage of American household make more than $139k, but I do know that less than 20% of the households earn more than $100,000 (with a median right around $50,000). Based on this, I can make an educated guess that less than 10% of the household earn more than $139k.

So, this means that the current $417,000 limits benefit around 90% of the households in the United States with respect to affordability -- and that seems like a fair and reasonable number.

Why should the average taxpayer bear the risk of those households earning more that $139k per year when the make up such a small portion of the population?

The key here is to remember the original purpose of the GSEs -- they were never meant to make mortgages for American's most affluent more accessible. They were created so that average Americans would have relatively easy access to *affordable* mortgages. The GSE's have succeeded in that original charter.

I simply do not see any reason to change the charter on something that has worked so well for 70 years now just because of a very temporary credit crunch.

Reactionary moves like raising the current limits puts the GSEs at further risk (and they're not doing well right now, as we speak). Potentially, GSE insolvency could have a MASSIVE negative effect on the real estate market -- far beyond the pressures of the current crunch.

If you think it's difficult to qualify buyers now, can you image how impossible it would be if the GSEs became insolvent due to some reacationary move made to solve a short-term, temporary problem?

Yikes!

Posted on Monday, June 16th, 2008 at 5:27pm.

Steve wrote: Joe,

Incidentally, I failed to answer you question regarding my viewpoints “regardless of area."

Clearly, the conforming limits create much more problems for people in the San Francisco than people in rural Oklahoma.

However, just like I wouldn't expect the people in the Midwest to cover the higher costs of public works in the California coastal areas, I wouldn't expect Midwesterns to cover the risks of higher conforming loans.

If the high-cost areas like Coastal California, South Florida, the Northeast, and Hawaii need to subsidize the risks of high-cost loans, let them do it themselves.

I just don't see why someone like my family, who lives in Tallhassee, should subsidize the risk of those folks who choose to live in Manhattan or San Francisco.

I guess I'm just selfish that way.

Posted on Monday, June 16th, 2008 at 5:41pm.

ericabiz wrote: I was going to write what Steve wrote, but I see he's already expressed it so eloquently! By the way, I agree with him AND I live in San Jose, CA (where I am currently a happy renter until prices drop the 30-40% they're going to have to drop for buying to make sense.)

I think I will write to my Congresscritters and say the opposite. Thanks for the reminder!

-Erica

Posted on Thursday, June 19th, 2008 at 1:39pm.

Aditi wrote: The lower loan limits would reduce access to affordable loans to residents of 99 high cost counties across 18 states .
Imposing a lower loan limit would greatly impact the economies by restricting the availability of credit, the availability of affordable home loans, and the availability of assistance to the middle income families in these communities who are struggling to stay in their homes So think wisely towards the loan limits.
========================
Aditi

Posted on Friday, June 27th, 2008 at 7:29am.

Steve wrote: Three weeks ago, I warned that the GSEs were at risk of insolvency and that taxpayers would be forced to bail them out. Today, this comes out:

From: http:// biz.yahoo.com/rb/080710 /fanniemae_freediemac_poole.html?.v=2

Mortgage lenders Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) are "insolvent" and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg.

"Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole was quoted as saying in an interview held on Wednesday.

Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying.

Shares of the two companies have taken a beating recently on worries about whether they can withstand more losses and support housing as well as concerns that they may need to raise massive amounts of new capital.

Freddie Mac shares tumbled 23.8 percent to $10.26 on the New York Stock Exchange on Wednesday, while Fannie Mae shares sank 13.1 percent to $15.31.

Poole could not be immediately reached for comment.

Posted on Thursday, July 10th, 2008 at 12:07pm.

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