September 30 2010 (Shirley Allen)
The United States Congress on Thursday voted to extend higher loan limits for government-backed mortgages for another year, a move that should help keep borrowing costs low and support the shaky housing sector.
The legislation approved by the House of Representatives and Senate, which President Barack Obama is expected to sign into law, would keep in place until October 2011 the higher $729,750 ceiling for single-family home mortgages in high cost areas other than Hawaii and Alaska.
The original legislation was approved back in 2008 during the height of the financial crisis to allow Freddie Mac and Fannie Mae to buy more loans at higher loan limits to encourage home buying on higher priced homes.
The loan cap was scheduled to shrink to $625,500 at the start of 2011. The move to extend the higher limit will effectively keep interest rates super-low for a large swath of home buyers.
The loan limits measure also includes an extension of the caps for loans backed by the Federal Housing Administration. Fannie Mae, Freddie Mac and the FHA are the main government support pillars for the battered housing market. In the three months through June, 82 percent of all loans originated were directly of indirectly backed by the government.