While ideally Fannie Mae and Freddie Mac would have been included, last week the House and Senate approved a measure that will reinstate the higher-value loan limits for FHA home loans to the pre-October levels. What that means is that areas around the state of Illinois could see a renewed increase. Due to changing housing indices and not knowing the median values that HUD may use I don’t want to speculate on exact loan limit levels, however if they go back to what they were for instance, areas around Chicagoland would be back at $410,000; however, much of state most likely won’t increase that much since many of the areas were closer to the floor value anyway. Stay tuned the next few weeks for the actual numbers.
Additionally, we at the Illinois Association of REALTORS® have been working on having the Chicagoland MSA designated a high-cost-area. What this would mean is that we could potentially see conforming loan limits be as high as the $625,500 in that area. This is still a work in progress and we were fortunate enough to have Congressman Michael Quigley (D-5th District) discuss this issue with the U.S. Treasury Secretary Timothy Geithner a week and a half ago. Congressman Robert J. Dold (R-10th District) also has been out in front on this effort by co-sponsoring legislation with Congressman Quigley to attempt to increase the loan limits as well. We are attempting to address this issue on multiple fronts and hope for a positive result soon.
There are many political arguments out there both pro and con on the value of Fannie and Freddie, and the losses suffered by taxpayers make this a passionate political topic. But the fact of the matter is that at this point in the market for residential mortgage-backed securities there are still hesitations in the private equity investor community that make a fully privatized system impossible at this time. In order to keep capital liquidity moving Fannie and Freddie are necessary to purchase and package the mortgages and sell them as securities in the capital markets. This is a complicated issue that will take a lot of thought and discussion but in the meantime what matters most is that mortgage money is available for our buyers and that lending limits in our neighborhoods in Illinois are judged fairly and accurately to reflect the market and encourage healthy, sustainable and yes, increased homeownership!