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    The American Banker, June 27, 2002

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    The American Banker, June 27, 2002

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    The American Banker, June 27, 2002

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    of 2

    Page 1

    202 of 203 DOCUMENTS

    The American Banker

    Legislators Mull Raising Conforming Limits


    June 27, 2002, Thursday

    BY TOMMY FERNANDEZ

    Concern over skyrocketing home prices has prompted a number of lawmakers to consider increasing the size of loans
    Fannie Mae and Freddie Mac can buy.

    Industry observers say such an increase could seriously hurt thrifts and other lenders that make jumbo loans, those
    larger than the government-sponsored enterprises are allowed to purchase. However, it could also help homebuyers,
    who could obtain a better interest rate on loans that would fall within the GSEs' grasp, observers say.

    Currently, Fannie and Freddie are prohibited from buying loans of more than $300,700 in the "lower 48" states. In
    Alaska, Hawaii, Guam, and the Virgin Islands, the conforming limit is 50% higher, at $451,050. In response to the
    five-year jump in home values -- in some areas they have risen by as much as 80% -- members of Congress are pushing
    to extend the higher limite to other states.

    "I don't see any downside," Rep. Barney Frank, D-Mass., who supports such an increase, said in an interview Tuesday.
    "Anything that helps make housing more affordable is a good thing."

    Rep. Frank said that a bill to increase the limit in the nation's eight costliest states for housing, including California and
    New York, would have a good chance of passing. "It doesn't hurt anyone," he said. "It's not a zero-sum situation."

    Rep. Gary Miller, R-Calif., helped stoke debate on the subject last Thursday by introducing -- and then withdrawing -- a
    legislative amendment that would have added California to the list of states with the higher loan limits.

    Deandra Brooks, Rep. Miller's press secretary, said he withdrew the amendment because it would "likely sink" the
    housing omnibus bill to which he attached it, the Housing Affordability for America Act.

    The amendment "was very controversial because of the budget implications it would have," she said.

    However, it did spur discussion on the GSE loan limits, as well as the larger issue of rising home prices, Ms. Brooks
    said.

    "The great thing is that we have gotten a number of calls from all over the industry -- from banks, realtors, and
    mortgage insurers -- who obviously had concerns about an amendment on this issue," but still "wanted to work with us
    to address the affordability issue in high-cost areas," she said.

    Rep. Miller, who has 30 years' experience as a developer in California, may reintroduce legislation on the state's
    conforming loan limit this year, after he meets with industry officials, Ms. Brooks said.

    If alternatives can be developed to address to the housing affordability problem in California, legislation on conforming
    loan limits might not be needed, she said. "Addressing the liquidity of the market is not the only solution out there."
    Page 2
    The American Banker, June 27, 2002

    Howard Glaser, the president of the consulting firm Capitol Hill Associates and a former senior official at the
    Department of Housing and Urban Development, said there is a "natural constituency" for a conforming loan limit
    increase.

    That constituency would include realtors as well as small and midsize lenders that do not have access to the jumbo
    market and thus could be "substantially" helped by a limit increase, he said.

    In addition, local elected officials, many of whom face their own affordable-housing issues, would look upon a
    conforming-limit increase as "a big political win," Mr. Glaser said. "The next time the issue comes up, you'll see more
    support from the lending community and local officials, who represent a real strong convergence of support."

    Fannie and Freddie's conforming limits are not set in stone. Each year government officials evaluate inflation rates and
    housing prices nationwide and decide whether the to adjust the limits. As a result, over the past two decades the limits
    have gradually increased.

    Some, however, would not welcome an increase. Every time the limits rise, "it takes away a little market share from the
    thrifts," said one industry observer, who spoke on condition of anonymity.

    "The higher the limit, the greater the potential market share" Fannie and Freddie will have, "and that takes away from
    the others," the observer said. "If I were a thrift, I would want as low a limit as possible so that there are more loans for
    thrifts and REITs to own."

    Another observer said that the nation's big banks "will fight like heck" to keep the loan limits from being increased.
    "The big banks own the jumbo market."

    Mike House, the executive director of the bank lobbying group FM Watch, said that if Fannie and Freddie "truly plan
    to fulfill the commitment they publicly made last week to the President to increase their purchases of loans to minorities
    and low-income families, then they will not seek or accept an increase in their loan limits -- which would have just the
    opposite effect of what they promised the President."

    Robert McCarson, a Fannie spokesman says the two GSEs are not advocating for an increase. "We are satisfied with
    the loan limits as they are."

    Doug Robinson, a Freddie spokesman said that his company has "historically taken no stance" on the issue. "The limits
    are set by statute. Any comments on the statute should be made by people who can change the statute."

    Copyright c 2002 Thomson Media. All Rights Reserved. http://www.americanbanker.com

    SECTION: MORTGAGES; Pg. 11

    LENGTH: 876 words

    LOAD-DATE: June 26, 2002

    LANGUAGE: ENGLISH

    GRAPHIC: photo, Frank

    Copyright 2002 American Banker, Inc.

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