Schumer wants to soften limits on Fannie, Freddie

Sen. Charles Schumer (D-N.Y.) proposed legislation last week to push up the caps on Fannie Mae and Freddie Mac's mortgage portfolios by a minimum of 10 percent for one year in an effort to ease the credit crunch.

Under the bill, 50 percent of the approximately $73 billion combined boost in their portfolios would be put toward refinancing subprime adjustable-rate mortgages into less costly loans; and the conforming loan limit would be raised to $625,000 in the priciest housing markets during the one-year period.

Though Schumer insists that "this is what Fannie and Freddie were designed for," such a move is opposed by the Bush administration as reported in Wall Street Journal (09/10/07) by Damian Paletta.

Naturally, the Bush administration would be against raising the conforming loan limit to $625,000 in the priciest housing markets. The priciest housing markets including Manhattan are in blue states.

While subprime has not been a big issue in affluent co-op dominated Manhattan, raising the conforming loan limit from $417,000 to $625,000 will help many qualified home buyers in NYC.

A buyer putting 20% down would be able to get a conforming loan on a $780,000 home vs the current $521,250 price cap.

Unfortunately $625,000 is still below the average price for a Manhattan apartment. Most Manhattan buyers seeking financing will still need the more expensive jumbo mortgages.