Mortgage Bankers to Ask U.S. to Lift Fannie, Freddie Loan Limit

By Dan Levy

Oct. 21 (Bloomberg) -- The U.S. Mortgage Bankers Association plans to ask the Federal Housing Finance Agency to increase the limit for Fannie Mae and Freddie Mac purchases or guarantees of single-family mortgages to $625,500 to bolster the housing market.

The mortgage bankers' residential board of governors is scheduled to vote today on the recommendation, which would call for an increase of 50 percent above the current limit of $417,000, at the trade group's annual conference in San Francisco.

``It will be stimulative,'' Garry Cipponeri, senior vice president of Chase Home Finance LLC in Iselin, New Jersey, and head of the mortgage bankers' capital markets committee, said in an interview. ``This market needs liquidity.''

A higher limit guaranteed by the government agencies is needed to spur lending in the most expensive housing markets, such as California and New York, Cipponeri said. The availability of mortgages above $417,000, known as non-conforming loans, ``has gotten worse'' amid a tightening of credit standards, he said.

Congress approved raising the limit temporarily to $729,500. That increase expires at the end of the year and the Federal Housing Finance Agency that oversees Fannie and Freddie would decide on whether to raise the limit permanently.

The government last month took control of Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac partly to encourage lending.

A spokeswoman for FHFA Director James Lockhart didn't immediately return calls seeking comment on the MBA proposal.

Mortgages are harder to obtain amid surging foreclosures and falling prices in the worst U.S. housing slump since the 1930s.

Home-loan originations may drop almost 20 percent this year to $1.9 trillion, about half the 2003 record, according to the Washington-based mortgage bankers group.

Cipponeri spoke on a panel at the MBA meeting yesterday with Joseph Murin, president of Ginnie Mae, and Dean Schultz, chief executive officer of the Federal Home Loan Bank of San Francisco.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net