Our own Dan Holler is out with a new column this week, taking a look at the impending vote to increase the loan limit that Fannie and Freddie will insure home loans to $729,750. It’s an issue that is flying under the radar, because it is very complicated, but Dan breaks it down like this:
“An increase in the conforming loan limit would increase taxpayers’ exposure to additional bailouts by allowing the Fannie Mae and Freddie Mac (the GSEs) to purchase and the Federal Housing Administration (FHA) to insure home loans up to $729,750. As of October 1, the stimulus-era increase ended and the limit dropped to $625,000. Before the financial crisis, it was $417,000.
“In practical terms, it would mean taxpayers would now be on the hook for guaranteeing home loans for as much as $729,750. If you’re looking to buy a home in that price range, you’re probably a fan of this idea because it would amount to an “upfront subsidy” of more than $123,000 since the down payment is not risk-based, according to the folks at Economics21. However, as we saw last week when taxpayers shelled out another $6 billion to keep Freddie Mac solvent, there is a serious risk to the taxpayer.”
Ever since the stimulus passed, President Obama and the left have been working hard to keep Fannie and Freddie intimately involved in the home mortgage business, despite their roll in causing the crisis. Americans need to remain engaged to catch these under-the-radar issues in order to hold our elected officials accountable, otherwise we’ll find the stimulus as the new way of life.
You can read Dan’s entire column here.