The House Appropriations Committee yesterday voted to extend Fanny Mae, Freddy Mac and the FHA's loan limits through September 2010. This is good news for home sellers and buyers in higher cost areas as it will significantly increase the easy of buyers obtaining affordable mortgage financing for homes over the 417,000 initial limit.
Limits were lifted last year because the market for secondary loans had collapsed. Banks could sell a loan under $417,000 to Fannie, Freddie and FHA and get it off their books. Larger loans were sold on the secondary market to other banks an investors. When this market collapsed banks and credit unions were left holding these loans on their books. By raising the the conforming loan amounts Congress is making larger loans much easier to obtain and the impact on the market is starting to be seen.
House committee votes to extend home-loan limits - OC Register
FHA Loans Set New Record in June - Wall Street Journal