WASHINGTON — House Speaker Nancy Pelosi downplayed concerns Thursday that her demand that the Senate increase the conforming loan limit in a housing package is weakening its chances for enactment.
Though she reiterated her desire to increase the limit on loans Fannie Mae and Freddie Mac can purchase and the Federal Housing Administration can insure, from the Senate's $625,000, the California Democrat said the ultimate decision on what the House would accept rests with Financial Services Committee Chairman Barney Frank, D-Mass.
"We're not holding up the bill," Rep. Pelosi told reporters. "We want higher limits. That is the reality of life in Massachusetts, in California, in New York, in Connecticut, and in many places in the country."
But she also said, "When the bill is agreeable to Mr. Frank, it will be agreeable to me."
The outlook for persuading the Senate to accept higher loan limits is murky. Sources said Banking Committee Chairman Chris Dodd, D-Conn., has likely pushed Republicans near their limit.
A senior Republican aide said, "If the speaker of the House thinks that the proper thing to do with this bill is to help people who make high six-figure incomes buy million-dollar houses, then the House is free to put that in the bill when it comes back over there. We think it's monumentally irresponsible."
Tinkering with the loan limits would affect the government-sponsored enterprises' ability to provide capital for moderately priced loans, the aide said. "It's a zero sum game. With the capital rules in place and the current restrictions above the statutory rules, they only have so much capital to work with. If they chose to purchase and securitize or purchase and hold high-cost mortgages, it comes at the expense of lower-cost mortgages."
But Rep. Frank shot back in an interview, calling such arguments, "monumentally stupid."
"This notion of a zero sum game, that's a zero-brain argument... none of that makes the slightest bit of sense," he said.
Rep. Frank said the roughly $100,000 loan limit difference would benefit the overall economy.
"We are not doing this as a favor to individuals only. What ought to be clear to anybody that is paying attention is that it's the economy as a whole that suffers when the mortgage market dries up... We have a real problem with the economy if there is not enough money going into the mortgage market," he said.
Rep. Frank said that higher loan limits would not hinder the GSEs and could enable the FHA to become more profitable. "To the extent that they have profitable loans at the upper level they will be doing well. As far as having limited capital, if they make a loan and people pay them, they can re-lend that money."
Besides higher loan limits, Rep. Frank said that the bill's effective date was still "a big problem" among other issues, which the House wants addressed.
Reaching an agreement before the August recess is "absolutely" possible and also necessary, he said. He said his staff and Sen. Dodd's staff would discuss the bill over the recess next week.
"If you don't get it done by the August recess that… is a real serious problem because things are deteriorating," he said.
The Senate was not expected to pass the bill until after it returns the week of July 7.
