It’s been the saga of fall, with enough twists and turns to pilot a TV miniseries.
First, the ceiling on federal loan limits fell on Oct. 1, ending a three-year expansion that raised the limit for FHA and other government loans from $625,500 to $729,750. Despite the substantial lobbying efforts of the National Association of Realtors, the Obama White House opted to end the measure and transfer lending onus to private financiers. But that was not the end of it.
In a late hour vote on Oct. 20, after showing little interest in the measure, the Senate voted to reinstate the higher limits, approving the raise by a 60-38 margin. Now, all that stands between homebuyers and higher federal loan limits is the House of Representatives, which must vote on the measure, and President Obama, who must sign it – and the lobbying efforts have re-intensified.
“The lobbying battle pits real-estate agents against mortgage insurers – and even has banking groups on opposite sides,” wrote Alan Zibel for The Wall Street Journal. “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.”
Realtors are on one side of this debate, led by Ron Phipps, president of the National Association of Realtors (NAR), who argues that the higher limits are imperative for homeowners to get financing in an era of banking stinginess.
Citing recent NAR data, Phipps claims that 660 counties in 42 states have been affected by the falling loan limits, as potential homebuyers have had to resort to cheaper homes or give up entirely on their homeownership dreams.
Phipps, though, seems strangely confident that the NAR will come out on top.
“We look to prevail and we expect to prevail,” Phipps said in Zibel’s piece. “We are working diligently to relay the message for American home buyers and home owners in a big way.”
On the other side, though, are the mortgage insurers, who are fighting against the higher limits with as much fervor as the NAR is fighting for it. Zibel writes that the Mortgage Insurance Companies of America spent $4.1 million in lobbying last year.
The insurers argue that loans should return to the private sector. Since the 2008 financial crisis, GSEs have been guaranteeing 9 out of 10 new home loans, and insurers worry, like the Obama White House, that a return to the higher loan limits will only increase the demand for FHA-backed loans and lesson the interest in private mortgages.
“Higher loan limits have done little to increase demand or prevent home prices from falling,” wrote Floyd Stoner, the 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.”
Interestingly, not all banking groups oppose the limits. Though the American Bankers Association is resisting the higher limit, the Mortgage Bankers Associate supports it.
The loan limits still need to be voted on by the House, and we’ll continue to cover the story as it develops. With House Republicans divided on the measure and the National Association of Home Builder now throwing its hand in the ring, it’s guaranteed to be an interesting story.