Senate Votes to Raise Loan Limit

Hoping that higher conforming loan limits will help housing market

Last week, the Senate voted to approve the high-balance conforming loan limit to $729,750 in wealthier neighborhoods, as part of a larger spending bill.

As of October 1, 2011, the largest conforming loan (loans that are eligible to be purchased or guaranteed by Fannie Mae and Freddie Mac) limit returned to $625,500 after several years of a temporary extension to $729,750.

There is a ways to go yet before the higher limit becomes an actuality. The approved measure is attached to a spending bill brought to the Senate by Robert Menendez, D-NJ. If that larger bill is approved by the Senate, it then has to pass through the House of Representatives. The Republicans, who control the House, have decidedly different ideas as to how to stir up the housing market and economy, including eliminating Fannie Mae and Freddie Mac not expanding their eligible loan pool.

In a post in the Wall Street Journal, Edward Mills, an analyst for FBR Capital Markets, is reported as saying that “given the strong bipartisan support in the Senate, the chances of the re-raise are well above 50%.”

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