Beginning October 1, less than 2 months from now, high-cost are loan limits will be reduced significantly. In San Diego County, the ceiling for conforming loans above $417,000 is $697,500. This ceiling helps a considerable number of buyers afford homes with a 20% to 25% down payment. The likely decline will be to $542,000 from $697,500. Not set in stone, but that is the chatter from the mortgage brokers. The financial malaise that struck with the Great Recession in the Fall of 2008 was countered with lowering interest rates, which spurred home buying.

As with home buying, so goes the economy – a healthy housing market creates jobs & spending. The U.S. government is a strong ally in homeownership. However, with recent budget discussions front and center, and the “D” word (default) used as leverage, government must find ways to reduce spending. Reducing or eliminating the government sponsored enterprises (GSE) known as Fannie Mae and Freddie Mac, would allow the U.S. to reduce a significant amount of spending. But, at what cost to the economy? Maintaining the flow of mortgages, ensuring that affordable mortgages are available, and ensuring that a range of mortgage products is available are tantamount to preserving a stable money supply.

It’s complicated, the processes in place that make our economy flow. But simple, really, when you consider what severe reactions would occur if the supply of mortgages dried up and real estate values dropped precipitously. Our local market has sustained heavy losses the 6 years, as have markets nation wide. By reducing the conforming loan limit, literally thousands of local home buyers will be shut out of the market. Fewer buyers = fewer sales = further devaluation in homes.

I urge you to contact your Congressional representative and ask them to make permanent the current limits.