Economic Stimulus Package Raises GSE Loan Limits

President Bush and leaders in the House of Representatives have reached a tentative agreement on an economic growth package that includes a measure to allow government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to buy mortgages up to $625,000, a significant increase over the current limit of $417,000.

According to a statement from the office of Rep. John Boehner, R-Ohio, who announced the agreement with Speaker of the House Nancy Pelosi, D-Calif., Federal Housing Administration (FHA)-backed conforming loan limits would be increased as well – from $362,000 to $725,000.

‘The agreement reached today meets the criteria the president set forward last week to provide an effective, robust, and temporary set of incentives to protect the health of our economy and encourage job creation,’ a statement from the White House adds, noting that neither the GSE loan-limit increases nor the taxpayer relief measures also included will raise taxes or introduce ‘wasteful spending provisions.’

Treasury Secretary Henry Paulson, however, was quoted in an AP article as opposing Fannie and Freddie's loan limits ‘without strengthening government power over the companies.’

The Office of Federal Housing Enterprise Oversight (OFHEO) disapproves of the proposal as well: ‘We are very disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the absence of comprehensive GSE regulatory reform,’ said OFHEO director James Lockhart in a statement. ‘To restore confidence in the markets we must ensure that the GSEs' regulator has all the necessary safety and soundness tools.’

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