Amended in Assembly June 12, 2014

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 amended, 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 begin delete not end delete to begin delete implement end delete begin insert continue to resist implementation of end insert any begin insert such end insert 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 begin delete memorializes end delete begin insert memorialized end insert the President and
Congress of the United States to recognize California begin delete is end delete begin insert as end insert a
high-cost area for purposes of purchasing a home and begin delete should end delete begin insert to end insert
be considered the same status as other high-cost areas; and

WHEREAS, In 2008, the California Legislature passed a joint
resolution begin delete to memorialize end delete begin insert that memorialized end insert 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 begin delete cost, and end delete begin insert cost; and end insert

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

begin insert

WHEREAS, In May 2014, the Director of the FHFA announced
that the FHFA “will not use its authority as conservator to reduce
the loan limits”; and

end insert begin insert

WHEREAS, The FHFA is not bound to follow a policy on loan
limits that protects California homebuyers in the future; and

end insert

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

WHEREAS, begin delete Nine end delete begin insert Eleven end insert 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 home
buyers the same access to safe and affordable mortgage capital as
home buyers in states with lower home prices; and

WHEREAS, The adverse effect of lowering the loan limits begin delete will end delete
begin insert would end insert have a negative impact on California home buyers that begin delete will end delete
begin insert would end insert 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 begin delete not end delete to
begin insert continue to resist implementation of end insert begin delete implement end delete any begin insert such end insert 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.