California Home Loan, California Home Loans, Home Buyers, Refinancing, Equity Loan, Debt Consolidation, Refinance, New Purchase

With median home prices that climbed more than 61 percent between 2000 and 2004 and wages that haven't kept up, it is no secret that San Diego continues to be among the least affordable markets in the country. But the California Association of Mortgage Brokers is convinced raising loan limits could help.

CAMB, which was in San Diego for a nationwide mortgage brokers conference last week, is supporting bill HR 1461 by Rep. Richard Baker (news, bio, voting record), R-La., that would raise Fannie Mae (NYSE: FNM - news) and Freddie Mac's (NYSE: FRE - news) home loan limit from its current level of $359,650 to either an area's median home price, or 50 percent higher than the conforming loan limit (whichever is less).

Under existing statutes, the loan limits are adjusted yearly based on the median sales price of a single-family home. This price is the same for all the lower 48 states.

Alaska, Hawaii, Guam and the Virgin Islands have been able to raise their loan limits by 50 percent more than the enforced limit in the rest of the country. Those places, known for their expensive housing, have had the higher limits for a number of years. This would reportedly mark the first time the limits were raised by as much as 50 percent in the lower 48 states.

The bill, which is on the House floor, has reportedly earned wide support from homebuilders, realtors and mortgage brokers.

Federal Reserve Chairman
Alan Greenspan and some economists have expressed concern about the bill, saying it could spur inflation or bring people into homes they can't afford. The legislation is also opposed because a national affordable housing trust fund was established in the bill.

The mortgage brokers don't believe these are viable reasons to oppose the legislation, however.

While homebuyers would still have to fund the down payment, the effective loan limit would climb from $359,650 to $525,089.

The average price of a resold single-family home in the county in June was $589,000, according to the San Diego Association of Realtors.

This program, claims CAMB, in many cases could eliminate the need for a jumbo loan that typically has a 25 to 50 basis point higher interest rate than a conventional mortgage.

Depending on how the loan is structured, CAMB calculated the change could save homebuyers between $83 and $167 per month, or $996 to $2,004 per year and $30,000 to $60,000 over the lifetime of the mortgage.

Putting this in perspective, the association said the savings could amount to more than $86 million to the San Diego region each year. The association said in the San Diego-area alone, 18,344 people who are now renting could become homeowners under the plan.

"Those who live in high cost areas shouldn't be penalized," said Michael Faust, chair of the CAMB Government Affairs Committee.

"Congress has a unique opportunity to create almost a quarter of a million new homeowners across the country without any additional costs to taxpayers," he continued. "This report highlights the extent of the savings of the savings for future homeowners and outlines the need to repair this flawed system."

CAMB reports that some 397,000 households across the country could be aided by raising the loan limits, and that this could result in the savings of nearly $750 million nationwide.

"We are here today to fight for an important reform that will ease the housing affordability crisis and save consumers as much as three quarters of a billion dollars," said John Marcell, CAMB president. "Our association is calling for an end to what we believe is a policy that discriminates from working families based on the communities they live in."

Faust said if people can sock away $100 a month at a child's birth as a result of this program, that would be more than $21,000 once they reached 18, not counting the interest that would accrue over that period.

While there may be bipartisan support for the higher loan limits, taxpayer groups are pressuring Rep.
Tom DeLay, R-Texas, to kill the bill as long as it has the affordable housing trust fund provision.

While the Congressional Budget Office estimates the creation of the fund could create $5.1 billion for housing between 2006 and 2015, the spending would end up creating a $300 million shortfall over that same period.