Senate Joint Resolution No. 19

Introduced by Senator Correa

(Coauthor: Assembly Member Dababneh)

March 10, 2014

Senate Joint Resolution No. 19—Relative to high-cost loan limits.

LEGISLATIVE COUNSEL’S DIGEST

SJR 19, as introduced, Correa. High-cost loan limits.

This measure would express the Legislature’s opposition to reduction of the current national and high-cost conforming loan limits for Fannie Mae and Freddie Mac by the Federal Housing Finance Agency (FHFA) and would urge the FHFA not to implement any reductions. This measure also would urge the President and Congress of the United States to join California in opposing any reduction of the national and high-cost conforming loan limits.

Fiscal committee: no.

WHEREAS, Since 1980, Congress has provided in statute for
“high-cost” conforming loan limits so residents in states where
the cost of housing is higher than the national average may still
gain access to safe and affordable mortgages; and

WHEREAS, In 2006, the California Legislature passed a joint
resolution that memorializes the President and Congress of the
United States to recognize California is a high-cost area for
purposes of purchasing a home and should be considered the same
status as other high-cost areas; and

WHEREAS, In 2008, the California Legislature passed a joint
resolution to memorialize its opposition to any reduction in
high-cost loan limits in California; and

WHEREAS, In 2008, the Economic Stimulus Act of 2008
created a temporary increase in mortgage loan limits and allowed
for areas in California to be recognized as high cost, and

WHEREAS, In July 2008, Congress passed The Housing and
Economic Recovery Act of 2008, which established the current
law and formula for determining loan limits, set the high-cost loan
limit formula, made permanent in statute language that allows for
areas in California to be recognized as high cost, and contained
language prohibiting the reduction of conforming loan limits; and

WHEREAS, In September 2008, Fannie Mae and Freddie Mac
were placed under conservatorship of the Federal Housing Finance
Agency (FHFA); and

WHEREAS, In January 2012, following the expiration of the
Economic Stimulus Act of 2008, Fannie Mae and Freddie Mac
high-cost loan limits were reduced from $729,750 back to the 2006
value of $625,500; and

WHEREAS, In December 2013, the FHFA issued a request for
comments on a proposal to lower the conforming loan limits for
Fannie Mae and Freddie Mac by an additional $25,000 in select
high-cost areas including California; and

WHEREAS, California has over 25 million residents that will
be adversely affected by the proposed regular and high-cost loan
limit reductions; and

WHEREAS, Nine counties in California have a median home
price above the proposed reduced cap on high-cost loan limits;
and

WHEREAS, FHFA data indicates that over 36,000 loans
originated in California could be adversely affected by the proposed
loan limit reduction; and

WHEREAS, California housing markets are only beginning to
recover from a sustained negative market, and continue to lag
behind the pace of recovery being experienced by the rest of the
nation; and

WHEREAS, Current high-cost loan limits allow California
homebuyers the same access to safe and affordable mortgage
capital as homebuyers in states with lower home prices; and

WHEREAS, The adverse effect of lowering the loan limits will
have a negative impact on California homebuyers that will ripple
through the housing market and the larger economy; now,
therefore, be it

Resolved by the Senate and the Assembly of the State of
California, jointly, That the Legislature opposes any reduction of
the current national and high-cost conforming loan limits for Fannie
Mae and Freddie Mac by the FHFA, and urges the FHFA not to
implement any reductions; and be it further

Resolved, That the Legislature urges the President and Congress
of the United States to join California in opposing any reduction
of the national and high-cost conforming loan limits; and be it
further

Resolved, That the Secretary of the Senate transmit copies of
this resolution to the President and Vice President of the United
States, to the Speaker of the House of Representatives, to the
Majority Leader of the Senate, to each Senator and Representative
from California in the Congress of the United States, to the
Secretary of the Treasury, and to the Director of the Federal
Housing Finance Agency.