Sherman Pushes DeMarco to Not Lower Conforming Loan Limits
WASHINGTON, DC – Rep. Brad Sherman (CA-30) along with Rep. Carolyn B. Maloney (NY-12), Ranking Member of the Subcommittee on Capital Markets and Government Sponsored Enterprises (GSE), and Rep. Gary G. Miller (CA-31), Vice Chairman of the House Financial Services Committee, sent a letter to Edward DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA), opposing any FHFA action to reduce loan limits. The letter was signed by a bipartisan group of 66 House Members.
“Higher Federal Housing Administration conforming loan limits are critical to supporting current housing prices and our overall economic recovery,” Congressman Sherman said. “In the Los Angeles area, these limits are not at the level of a mansion; they afford a middle class home. We cannot allow the FHFA to go against what Congress has put into law and what Director DeMarco has said previously.”
“This is a continuation of my work on conforming loan limits for high cost areas,” Sherman continued. “I am glad to see that even in this current political environment we had a bipartisan group of cosigners. This is an issue many on both sides can agree on.”
Congresswoman Maloney said, “The simple fact is that reducing the maximum for conforming loans from the current—and inadequate—$625,000 cap will hurt high cost areas such as my district and, indeed, all of New York City. To even consider doing so after saying you won’t is a classic bait-and-switch, and I hope the FHFA doesn’t go down that road.”
Congressman Miller added, “Congress did not give FHFA the authority to reduce the loan limits. In fact, we included language in statute explicitly stating that the loan limits could not be reduced. Congress is currently working on housing finance reform and this larger conversation is the appropriate place to discuss the definition of conforming loans.”
“Housing prices are on the rise, but lowering the loan limits could put the housing market’s fragile recovery at risk,” Miller continued. “This is not consistent with FHFA’s role as conservator. Lowering the limits would place taxpayers at greater risk due to a decline in home values, ultimately harming the GSEs’ financial positions. While we need to attract more private capital participation in the mortgage market, a reduction in the loan limit is not the right way to achieve this goal.”
This action is consistent with Sherman’s continual support of increasing conforming loan limits for high-cost areas. In 2008, Congressman Brad Sherman (D-Sherman Oaks) and Congressman Gary Miller (R-Brea) were successful in a bipartisan effort to create a high-cost area conforming loan limit capped at $625,500 in high cost areas that have median home prices above $417,000. Those limits were later temporarily increased to $729,750, thanks to the ongoing advocacy of Reps. Sherman and Miller, and their partners in Congress from both sides of the aisle.
Unfortunately, the temporary $729,750 limits were allowed to expire on September 30, 2011, and the loan limits dropped overnight from $729,750 to $625,500 in high-cost areas.
Sherman kept up the effort to maintain higher loan limits however, and in response Congress passed an amendment through the Fiscal Year 2012 appropriations process that restored the Federal Housing Administration conforming loan limits to the $729,750 for two years, until December 31, 2013.
The text of the letter follows:
Edward DeMarco, Acting Director
Federal Housing Finance Agency
400 7th Street, Southwest
Washington, DC 20024
Dear Acting Director DeMarco,
We are deeply concerned by your recent statement that “FHFA has been analyzing approaches for reducing Fannie Mae and Freddie Mac loan limits across the country and any such change would be announced with adequate advance notice for implementation on January 1, 2014.”
Such action by a single regulator would serve only to further tighten credit availability and thereby erode progress in our fragile housing recovery. Currently, homeownership rates are at an historic 18-year low. Mortgage credit is virtually nonexistent for middle class Americans with less than stellar credit. Unless borrowers have a credit score of 760, conventional mortgage financing will simply be out of reach.
Moreover, housing is the cornerstone of our economy, and arbitrary regulatory reduction of the conforming loan limit will further disrupt our overall economic recovery. We think you said it best yourself, when you testified before the House Financial Services Committee on May 25, 2011 that the Director of FHFA, as conservator, has not unilaterally set the maximum loan rate, proclaiming, “That essentially has never been done. And as I testified before, I don’t intend to act unilaterally in lowering the loan limit because the Congress of the United States has been so actively and repeatedly involved in adjusting the conforming loan limit.I believe that is an important issue of national policy.”
You further articulated our shared concern, “I think for me to do this unilaterally would risk some disruption in the marketplace. It could be inconsistent with my responsibilities as conservator. I really and truly believe that the Congress of the United States is the body that should make the determinations about the future path of the loan limit if it is going to be something other than what current law provides.”
We could not agree more. The Housing and Economic Recovery Act of 2008 contains specific language prohibiting the conforming loan limit from declining. It states that if the “annual adjustment is a decrease, then no adjustment shall be made.” This is a clear indication of Congressional intent to retain stability for housing markets.
We urge you to continue to defer to the United States Congress on whether the conforming loan limits should be reduced and allow our delicate recovery in housing to continue.
Sincerely,
Brad Sherman (CA-30)
Carolyn B. Maloney (NY-12)
Gary G. Miller (CA-31)
Maxine Waters (CA-43)
Michael E. Capuano (MA-07)
Joyce Beatty (OH-03)
Carolyn McCarthy (NY-04)
Mike Quigley (IL-05)
Jackie Speier (CA-14)
Charles B. Rangel (NY-13)
Michael G. Grimm (NY-11)
Jim Costa (CA-16)
Madeleine Z. Bordallo (GU)
Eleanor Holmes Norton (DC)
Steven A. Horsford (NV-04)
Peter T. King (NY-02)
Christopher H. Smith (NJ-04)
Patrick E. Murphy (Fl-18)
Julia Brownley (CA-26)
Joseph J. Heck (NV-03)
Gwen Moore (WI-04)
Gerald E. Connolly (VA-11)
Keith Ellison (MN-05)
Elizabeth H. Esty (CT-05)
Don Young (AK)
Albio Sires (NJ-08)
Jerry McNerney (CA-09)
Adam B. Schiff (CA-28)
Gary G. Peters (MI-14)
Doris O. Matsui (CA-06)
Niki Tsongas (MA-03)
John Garamendi (CA-03)
Lois Capps (CA-24)
Dina Titus (NV-01)
Matthew A. Cartwright (PA-17)
Carol Shea-Porter (NH-01)
Michael M. Honda (CA-17)
George Miller (CA-11)
Tony Cárdenas (CA-29)
Denny Heck (WA-10)
Mark Takano (CA-41)
Susan A. Davis (CA-53)
Jared Huffman (CA-02)
Michael H. Michaud (ME-02)
Sam Farr (CA-20)
Betty McCollum (MN-04)
Gregory W. Meeks (NY-05)
James P. McGovern (MA-02)
Anna G. Eshoo (CA-18)
Ed Perlmutter (C0-07)
Barbara Lee (CA-13)
Lucille Roybal-Allard (CA-40)
Janice Hahn (CA-44)
Jim Matheson (UT-04)
Ken Calvert (CA-42)
Chris Van Hollen (MD-08)
Mike Thompson (CA-05)
Earl Blumenauer (OR-03)
David G. Valadao (CA-21)
Bill Foster (IL-11)
Zoe Lofgren (CA-19)
Bradley S. Schneider (IL-10)
Grace Meng (NY-06)
Joseph Crowley (NY-14)
Janice D. Schakowsky (IL-09)
Marc A. Veasey (TX-33)
###