The Honorable John BoehnerUnited States House of Representatives1011 Longworth House Office BuildingWashington, DC 20515
Dear Speaker Boehner:
On behalfof the 362,000 members of the National Taxpayers Union (NTU), I urge you to opposeany language extending the Federal Housing Administration’s (FHA’s) higher conformingloan limits during the conference process on the “minibus” appropriations bill.Returning these limits to extraordinarily high TARP- and stimulus-era levelsonly serves to increase the size of potential taxpayer liabilities while alsocreating a substantial impediment to winding down the federal government’s harmfulinterference in the housing market.
Duringthe housing crisis and subsequent liquidity crunch (in no small part caused bythe government’s own disastrous policies) Congress allowed the FHA to insure,and government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac topurchase, mortgages at generous rates: up to 125 percent of an area’s medianhome price in 2007, or $729,750, whichever was lower. On October 1stof this year, these limits were modestly reduced as scheduled to 115 percentand $625,500, respectively – rates substantially higher than the $417,000 ceilingprior to the recession.
Reversingthese sensible reductions to conforming loan limits would do little to boostthe housing market, while posing a large additional risk to taxpayers who havealready felt the sting of more than $150 billion in bailouts to Fannie andFreddie. Allowing the GSEs to purchase loans of such an extraordinary size(more than three times the median home price), whether offset by a fee or not,is simply an unjustifiable taxpayer-backed benefit for well-to-do home buyers. Indeed,of the more than 1 million FHA-insured mortgage purchases in 2010, a mere 4,650(0.46 percent) were above the $625,500 limit.
Ratherthan raising conforming loan limits, the best method to protect taxpayers andhasten the return of a healthy market is to gradually wind down the federalgovernment’s distortionary involvement in the housing sector. There isconsiderable evidence to suggest that private entities would be capable ofproviding the necessary capital were they not forced to compete with entities likeFannie Mae and Freddie Mac who can borrow at below market rates due to theirfederal guarantee. Following the announcement of the lower loan limits inAugust, and their implementation through September, the Commerce Departmentreported that new home sales rose by 5.7 percent – hardly revealing any immediateneed that justifies taxpayer exposure to more loans.
Continuingto provide federal backing to these jumbo loans will only delay the much-neededtransition away from government meddling in the housingmarket. Therefore, NTU hopes you will work with conferees to ensure taxpayersare protected from any misguided effort to boost conforming limits.
Sincerely,
Brandon GreifeFederal Government Affairs Manager