Congress last week approved a short-term extension for flood insurance, but failed to extend the conforming loan limits. REALTORS® said they are pleased with the flood insurance extension but still believe a longer term extension is needed to ensure access to affordable flood insurance for millions of homeowners. They say they are gravely concerned that reducing the loan limits will hurt high-cost areas like Silicon Valley, whose markets have been recovering nicely.
Last Monday, Sept. 26, the U.S. Senate passed the Continuing Appropriations Act (H.R. 2608), which also included a provision extending the National Flood Insurance Program (NFIP) until Nov. 18, 2011. The resolution was approved by the House this week. While pleased with the extension, the National Association of REALTORS® (NAR) is urging Congress to finish its work on the 5-year reauthorization bill (H.R. 1309) before this latest extension ends, in order to provide certainty and avoid further disruption to real estate markets.
"The NFIP was created because of the lack of available and affordable flood insurance in the private market, which remains true today, 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," NAR president Ron Phipps said in a statement released Tuesday. "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."
REALTORS® expressed their disappointment and concern that Congress failed to extend the FHA and 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 for the Federal Housing Administration and government-sponsored enterprises Fannie Mae and Freddie Mac," 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."
On 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). The high cost cap will fall from $729,750 to $625,500.
Gene Lentz, president of the Silicon Valley Association of REALTORS®, expressed the concern of members of the local trade association. "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."
With the loan limit reduced to $625,500, mortgage loans higher than that amount will be considered non-conforming jumbo loans and require higher down payments. Under the new GSE and FHA loan limits, Santa Clara County's loan limits drop by $104, 250. The California Association of REALTORS® estimates 7.8 percent of home sales in the county would be rendered ineligible under the lower GSE limits and 12.2 percent ineligible under the FHA loan limits.
Lentz said REALTORS® will continue to work with Congress to attempt to restore the higher limits as quickly as possible.
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 email or call the SILVAR office at (408) 200-0100.