Buyers, sellers and realty agents in high-cost housing markets in California and along the East Coast can breathe a little easier about expiring mortgage limits for FHA, Fannie Mae and Freddie Mac.

That's because a House subcommittee last week reported out a HUD appropriations bill that would extend the upper limits, close to $730,000 in the costliest markets, through September of 2010.

The high-cost mortgage maximums all are scheduled to expire this coming December 31, absent congressional action.

Realtors and builders say that would be disastrous in major markets that need FHA, Fannie and Freddie loans far beyond the previous limits of $417,000 and $625,000 in order to support a housing recovery.

Though the appropriations bill must still pass the House and Senate, that's considered likely now -- given the Obama administration's support for the higher limits and strong support from building and realty groups.

The current high limits were put into place earlier this year by the Economic Stimulus Act. The new bill allows both the Secretary of HUD and the director of the Federal Housing Finance Agency -- the regulator for Fannie and Freddie -- to raise loan limits in "sub-areas", where housing prices are significantly higher than in the surrounding, larger market area.

The legislation also makes it clear that the government intends to keep the FHA mortgage insurance program humming at high volume. It authorizes up to $400 billion in new FHA loan coverage during the 2010 fiscal year, which begins in September.

Ginnie Mae, which guarantees FHA and VA loans in mortgage bond securities for Wall Street, is authorized to guarantee up to $500 billion.

In a move that fulfills one priority of the Obama administration and HUD Secretary Shaun Donovan, the bill appropriates $50 million for FHA research, development and pilot testing of a new generation of "energy efficient mortgages" for both single family homes and apartments.

Donovan has said he favors creation of a new FHA product line offering underwriting concessions, more flexibility on debt-to-income ratios, larger loan amounts and even lower interest rates to borrowers who purchase certified energy efficient houses, or who plan to renovate their houses to dramatically cut energy consumption.

Major energy legislation already approved by the House, and awaiting final action by the Senate, would authorize a much broader program of special loan terms for energy efficient mortgages from FHA, Fannie Mae and Freddie Mac.

The same bill would require all real estate appraisers to take energy improvements into account in valuing homes, and would require states to make competency in energy efficiency an integral part of appraiser licensing and training.

Published: July 27, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.