WASHINGTON The government should allow the caps on the size of mortgages it will back to return to pre-financial crisis levels in order to revitalize the role of private lenders in the home loan market, an Obama administration housing official said on Thursday.
Congress had raised the caps to $729,750 in high-priced real estate markets in 2008 in a move to provide liquidity following the subprime mortgage meltdown.
The temporarily higher loan limits at Fannie Mae, Freddie Mac and the FHA will revert to pre-crisis levels on October 1 unless Congress extends them, with the upper limit falling back to $625,500.
While time is short, it is still possible Congress will extend them.
"We want private capital to come back into the market," the acting commissioner of the Federal Housing Administration, Carol Galante, told a House Financial Services subcommittee. "We support the expiration of the higher mortgage loan limits."
A group of bipartisan lawmakers in the House on Thursday asked that a measure that would provide for a short-term extension of the higher caps be placed on legislation Congress will need to move by the end of the month.
The group of 37 lawmakers, led by Representative Gary Ackerman, a New York Democrat, sent a letter to top lawmakers on the House Appropriations Committee urging them to attach the provision to a stop-gap funding bill needed to keep the government running when the new fiscal year begins.
The Obama administration initially called for letting the higher limits expired in February as a step toward letting the private sector play a larger role in a market the government has come to dominate.
Federal Reserve Chairman Ben Bernanke has also said he feels the mortgage market should "wean" itself off the higher backstop from the government-controlled enterprises.
(Reporting by Margaret Chadbourn; Editing by Leslie Adler)