SHERMAN BILL INCORPORATED INTO LEGISLATIVE PACKAGE
Washington, D.C. - Congressman Brad Sherman (D-Sherman Oaks) hailed the passage of the Federal Housing Finance Reform Act of 2005 (H.R. 1461) by the House Financial Services Committee today. The bill included a Sherman proposal to increase the conforming loan limit --- the limit on the size of loans that Fannie Mae and Freddie Mac can buy --- in high cost areas, including the Los Angeles area. The Sherman provision will make loans easier to obtain and will lower interest rates in areas where the median home price far exceeds the national average. Sherman has pursued this issue in previous Congresses through stand alone legislation.
œIncreasing the conforming loan limit will help homebuyers in the Los Angeles area at no cost to the taxpayer. If local banks can sell the loans they extend to Fannie Mae and Freddie Mac, the interest rates on those loans will be roughly Â¼% lower. This will result in savings of thousands of dollars for Los Angeles homebuyers who borrow up to $500,000 to buy a home, Sherman said.
œThe Los Angeles areas current median home price is $477,300, up from $423,500 a year ago. The Federal Housing Finance Reform Act will raise the conforming loan limit in designated high cost areas to either the median home price of that area or 150% of the current limit. So the conforming loan limit in Los Angeles would be raised to $477,300, up from the current $359,650, Sherman continued.
œFannie Mae and Freddie Mac are supposed to help average families buy homes, but they cannot help anyone with a home loan over $359,650. Many modest homes in the San Fernando Valley, and around the Los Angeles area, sell for well over that amount. With this legislation those two entities can finance mortgages in Los Angeles up to $509,230, Sherman explained.
The Federal Housing Finance Reform Act will now be considered by the full House of Representatives and then go to the Senate.