Is he really in favor of dropping the conforming loan limit? Are they actually going to drop the conforming loan limit? It seems simply insane to me: yet another contractionary shock to the housing market is not something that Dr. Bernanke should be ordering right now.
Bernanke: Private sector ready for conforming loan limit drop: Federal Reserve Chairman Ben Bernanke said in a House committee hearing Wednesday the private market is set to fill the void when the conforming loan limits on government-backed mortgages expire in October – at a higher cost to homebuyers.
Congress raised the conforming loans limits in 2008 to allow Fannie Mae, Freddie Mac and the Federal Housing Administration to insure, guarantee and buy more mortgages at a time when private funding froze during the financial crisis.
Without an extension, the maximum mortgage amount will drop to $625,500 from $729,750 in high-cost areas on Oct.1.
"As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis," Bernanke said. "I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost."…
According to Capital Economics, only 5% of the loans bought or guaranteed by Fannie and Freddie fell above where the conforming loan limit will drop to in October.