Should taxpayers keep subsidizing Fannie Mae and Freddie Mac so that that affluent home buyers can get a break?
Do Fannie and Freddie need to keep buying jumbo loans? Mortgage loans up to $700,000?
Or can we leave that to the private market?
So far taxpayers are out $164 billion for Fannie and Freddie and the total bill will likely run in the hundreds of billions of dollars.
Is that enough to convince politicians to stop funding Fannie and Freddie? No way!
The issue concerns the so-called conforming loan limit, or the size of mortgages that the two government housing giants are allowed to guarantee. The amount was $417,000 before the housing meltdown, but in February 2008 President George W. Bush bowed to the Pelosi Congress and increased it to $729,750 for homes in the most expensive parts of the country. This was sold as a temporary measure, but in 2009 President Obama extended it.
The limit is now scheduled to decline on October 1 to $625,500, which is still far above the average U.S. sale price for existing homes of $236,200. The White House position, outlined in a February white paper and affirmed to us Thursday evening, is to reduce the limit on schedule.
Even this small reduction in taxpayer exposure is too much for the housing lobby, and right on time Republican John Campbell of California and Democrat Gary Ackerman of New York have proposed a bill to maintain the current limit for another two years. This would keep Fan and Fred in their dominant position in the U.S. mortgage market, while continuing to provide a taxpayer guarantee to an already heavily subsidized corner of the economy. Together with the Federal Housing Administration, these toxic twins now control 90% of the U.S. mortgage market.