Nearly a quarter-million more families in high-cost areas throughout the country could qualify for financing if the federal limit was raised on mortgages that can be purchased by Fannie Mae and Freddie Mac, according to a new report.

The report by the California Association of Mortgage Brokers on the economic benefits of boosting the so-called "conforming loan" limit also says borrowers could save anywhere from $57 to $171 a month because of the one-quarter to one-half percent interest rate benefit accorded to such loans because of their government connection.

"Every taxpayer should have equal access to the government subsidies through Fannie Mae and Freddie Mac," said Michael Faust, chair of CAM's Government Affairs Committee. "Every dollar saved can make the difference between home ownership and a lifetime of renting."

The group is supporting a section in federal legislation to reform how the two-government sponsored enterprises operate that would raise the loan limit in high cost areas up to the median house price, not to exceed 150 percent of the ceiling elsewhere.

The bill is awaiting floor action in the House. But the Senate version of the reform measure does not contain such a provision.

Currently, only four markets are accorded high-cost status -- Alaska, Hawaii, Guam and the Virgin Islands -- under the rules by which the conforming loan limit is set every year. But the rules were put in place many years ago, the report says, and since then, numerous places have become more unaffordable that the original four.

The result is what the CAMB says is an "unequal distribution" of the government subsidy provided by Fannie Mae and Freddie Mac, two government-chartered institutions which purchase loans from primary lenders and package them into securities that are sold to investors worldwide.

"Our association is calling for an end to what we believe is a policy that discriminates against working families based on the community they live in," said CAMB President John Marcell, a loan broker in Upland.

While such a change would impact numerous California locations, the issue is a "national problem," said Faust of American Pacific Mortgage in Roseville. According to the study, which was released at CAMB's annual convention last week in San Diego, nearly 43,000 more borrowers in the New York City area could afford a median priced house if they could qualify for conventional financing. In Boston, some 22,500 more people could qualify for a median priced house in that area.

But in California, the mortgage brokers group calculates that nearly 65,000 more people could afford a median priced house in the Los Angeles metro area alone. The median in the LA area was $485,000 as of the first quarter.

Elsewhere in the state, 23,000 borrowers in the San Francisco Bay Area, 18,300 in the San Diego metro area, 10,400 in San Jose and 11,200 in Riverside-San Bernardino could afford a median priced house in their respective markets.

In San Diego, where the median at last report was $525,000, Ed Smith of the Plaza Financial Group in La Mesa, said that he has been turning more would-be borrowers away over the last few years than at any time in his 23 years in the business.

"I'm telling them to get on I-15 and leave the county" if they want to qualify for a home loan, said Smith, who is president of CAMB's San Diego Chapter.

The long-time broker said that while the project $167 a month savings from being able to qualify for conventional financing may not seem like much, it could mean "the difference between owning a home in this county or leaving it" for many people.

Published: August 10, 2005

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