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Congress extends flood insurance, but not high loan limits

Wednesday, October 12, 2011

Congress has extended the flood insurance program through mid-November, but has failed to extend the higher conforming loan limits, which expired September 30. It's a case of good news and bad news for home owners, according to REALTOR® officials.

On Oct. 4, Congress extended the National Flood Insurance Program authority as part of a broader stopgap government funding measure, the Continuing Appropriations Act (H.R. 2608). This latest extension will run through Nov. 18, 2011. The National Association of REALTORS® wants Congress to finish its work on H.R. 1309, the 5-year reauthorization bill, before this extension ends, in order to avoid further disruption to real estate markets.

The National Flood Insurance Program was created because of the lack of available and affordable flood insurance in the private market and serves as an alternative to expensive taxpayer-funded disaster relief for flood victims. The program writes and renews flood insurance policies for more than 5.6 million home and business owners in 21,000 communities across the country, according to NAR.

"We are hopeful that members of Congress will reauthorize the program before the continuing resolution expires on November 18, so that taxpaying families won't have to go without essential flood protection and the housing market is provided with the certainty it needs for a recovery," said Ron Phipps, NAR's president.

Meanwhile, REALTORS® said they are disappointed that Congress failed to extend the Federal Housing Authority (FHA) and government-sponsored enterprise (GSE) mortgage loan limits in the continuing resolution. "It is unfortunate that Congress missed an opportunity to further assist the housing market recovery by extending higher mortgage loan limits," said Phipps. "The lack of mortgage availability is already a real concern and lowering the loan limits will only further restrict liquidity for creditworthy home buyers."

Conforming loan limits determine the maximum amount that Fannie Mae, Freddie Mac, and the FHA can buy or guarantee on a property. Beginning Oct. 1, the conforming loan limits declined in 669 counties in 42 states, including San Mateo and Santa Clara counties. The new limits will be equal to 115 percent of the local area median home price (down from 125 percent). In Santa Clara County, the GSE and FHA conforming loan limit was reduced from $729,750 to $625,500. This means mortgage loans higher than $625,500 will be considered non-conforming or jumbo loans and require larger down payments and higher monthly payments.

"We are seriously concerned since the Silicon Valley region is one of the high-cost areas impacted by the loan limit reduction. Our housing market has been recovering nicely, but now, in addition to stricter lending requirements, buyers have to contend with more obstacles to purchasing a home," said Gene Lentz, president of the Silicon Valley Association of REALTORS®.

The California Association of REALTORS® estimates 7.8 percent of single-family home sales in Santa Clara County would be ineligible for conforming loans under the lower GSE limits and 12.2 percent would be ineligible for conforming loans under the FHA loan limits.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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