Sherman: Good News for Valley Home Buyers

SHERMAN OAKS - Congressman Brad Sherman said home buyers in the San Fernando Valley will benefit from a higher cap announced Tuesday on the value of mortgages that may be purchased by government-backed enterprises designed to encourage home ownership.

œThis is a step in the right direction, but many more middle-class homeowners in Southern California and other high-priced housing markets deserve a fairer shake, Sherman said.

The cap on mortgages that may be purchased by Freddie Mac and Fannie Mae, the government-chartered mortgage enterprises, will rise from $359,650 to $417,000 for 2006, the Office of Federal Housing Enterprise Oversight announced. The annual adjustment will make an estimated 466,326 more homeowners eligible for lower interest rates.

The new cap on so-called œconforming loans still falls far short of the $600,000 median price for a single-family home in the San Fernando Valley in October, when single-family homes and condominiums tied record highs in both categories, according to the Southland Regional Association of Realtors.

Sherman, a member of the House Financial Services Committee, has championed legislation to raise the œconforming loan ceiling for borrowers in Southern California and other areas with above-average home prices.

The federally-chartered Fannie Mae and Freddie Mac are able to borrow more cheaply than rival mortgage finance companies. The rate on "conforming loans" they may purchase from private lenders is usually at least a 0.25 percentage point lower than the interest rate the lenders charge on "jumbo loans." The savings are passed along to borrowers.