(Adds detail, trade association statement)
By Patrick Rucker
WASHINGTON Jan 16 The U.S. Treasury Department
said on Wednesday it would not support raising the size of home
loans that Fannie Mae FNM.N and Freddie Mac FRE.N may buy
until a comprehensive reform package is passed by lawmakers.
Under current rules, Fannie Mae and Freddie Mac may not buy
home loans valued above $417,000. But the companies and their
allies have argued that those limits should be raised, at least
temporarily, so they could buy some of the bigger loans being
shunned by investors.
"We could support raising the conforming loan limit only as
part of comprehensive reform," Treasury Spokeswoman Jennifer
Lawmakers would have to pass legislation in order to raise
the loan levels, and the White House currently opposes such a
"It could happen, but the buzz needs an identifiable
sponsor and statements of support from the usual opposition
before it becomes a trade that lasts," Jim Vogel, agencies
analyst at FTN Financial Capital Markets in Memphis, Tennessee,
wrote in a client note.
Shares of Fannie Mae and Freddie Mac stocks rose in
mid-afternoon on hopes that a federal economic stimulus package
would include loosening constraints on the two
government-sponsored enterprises. Both ended higher, with
Fannie up 2.75 percent at $37.30 and Freddie up 2 percent at
$31.35. But both were well off the day's highs after the
Treasury Department said it was not supportive of raising the
loan level without other reforms.
HOUSING INDUSTRY SUPPORT
The National Association of Home Builders and the Housing
Policy Council endorsed the Treasury position that the loan
levels should be temporarily increased after reform.
The two influential housing trade groups endorsed the
Treasury position in an unusual joint statement.
While the builders have argued that the loan limit should
be increased indefinitely, many large lenders who make up the
Housing Policy Council want those limits kept in place.
"With the potential for an economic recession increasing,
now is the time for all of us to put aside our parochial
interests and focus on the job of stabilizing the housing
market and getting the economy back on track," said Brian
Catalde, president of the home builder group.
The U.S. House of Representatives has passed its version of
reform for the two government-sponsored enterprises. But Sen.
Christopher Dodd, who chairs the Senate Banking Committee, has
not yet drafted a bill.
As lawmakers begin to focus more on November's elections
and less on today's legislative agenda, odds are dropping that
Washington can grapple with the thorny question of GSE reform
RAISE LOAN LIMITS NOW?
In part because the reform effort has stalled, allies of
Fannie Mae and Freddie Mac are pushing for the loan limit to be
Sen. Charles Schumer, a New York Democrat, has introduced a
bill that would temporarily raise the loan limit cap in order
to help financial markets deal with current housing woes.
But the two trade associations said Wednesday they are less
supportive of increasing the loan size in the absence of
A spokeswoman for the Housing Policy Council said the trade
group opposed raising the conforming loan limit without
Jerry Howard, the chief executive of the home builders
group, had a softer view on increasing the mortgage loan limit
without new legislation. "We could live with that but we don't
think it would be as effective as total reform," he said.
(Reporting by Patrick Rucker; Editing by Dan Grebler)