BILL ANALYSIS Ó
SJR 19
Page 1
Date of Hearing: June 23, 2014
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
SJR 19 (Correa) - As Amended: June 12, 2014
SENATE VOTE : 37-0
SUBJECT : High-cost loan limits.
SUMMARY : Expresses the Legislature's opposition to the
reduction of the current national and high-cost conforming loan
limits and would urge the Federal Housing Finance Agency (FHFA)
to resist implementation of any reductions to those limits.
EXISTING FEDERAL LAW
Establishes the FHFA, and places responsibility with FHFA for
overseeing the Federal National Mortgage Association (Fannie
Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac).
FISCAL EFFECT : None
COMMENTS :
During the near shutdown of the U.S. credit markets due to the
subprime housing collapse Congress, passed the Housing and
Economic Recovery Act (HERA) of 2008, Pub.L. 110-289, 122 Stat.
2654, enacted July 30, 2008. HERA, among other things,
temporarily increased the conforming loan and high-costs loan
limits and allowed for several communities in California to be
recognized as high cost. The conforming loan limit is a vital
tool in the mortgage market as it represents the ceiling at
which Fannie Mae and Freddie Mac will buy these mortgages on the
secondary market. Ensuring the conforming loan limit keeps up
with California home prices ensures that mortgage credit is
available for borrowers who may not otherwise be able to afford
the increased costs of a jumbo loan (A loan above the conforming
loan limit). In January of 2012 the increased loan limits
established by HERA expired and the high-costs limits were
lowered back to the 2006 value of $624,500. Then, in December
2013 FHFA issued a request for comments on a proposal to further
lower the loan limits by an additional $25,000. These
adjustments have a major effect on the mortgage market as Fannie
SJR 19
Page 2
Mae and Freddie Mac control approximately 60% of the national
mortgage market. On May 13th, 2014 FHFA announced that they
would not lower the conforming loan limits any further. With
this announcement, it is necessary to pass this resolution?
Future of Federal Government Participation in the Mortgage
Market.
In 2008, as a result of the runaway lending that precipitated
the housing market collapse, Fannie Mae and Freddie Mac (Also
known as the Government Sponsored Entities (GSEs)) were loaned
$187 billion from the United States Treasury and placed under
the conservatorship of FHFA. This has raised numerous questions
bout the future participation of the government in the mortgage
markets via the GSE's. The United States Senate Banking
Committee passed legislation that would end the GSE's support
for the mortgage market and instead provide a mortgage insurance
program that would require private capital to take the first 10%
in any losses. At this time it does not appear that the effort
has enough support in Congress to make it to the President's
desk. Additionally, numerous housing and community groups have
expressed concerns regarding the plan and the GSEs still face
dozens of investor lawsuits that could potentially tie-up
Recently, President Obama's nominee to lead the Department of
Housing and Urban Development, Julian Castro, urged
Congressional lawmakers to move forward with efforts to end
Fannie Mae and Freddie Mac.
Suggest amendments :
1)On page 2, line 16 after "the" insert "temporary high-cost
loan limit increase provided in the"; and
2)Page 2, lines 27 and 28 states, "WHEREAS, The FHFA is not
bound to follow a policy on loan limits that protects
California homebuyers in the future; and." Staff recommends
the deletion of this statement as those things that may
provide for a "policy?that protects California homebuyers.."
would be subjective factors subject to numerous debates and
opinions. Therefor the amendment would be, on page 2, delete
lines 27 and 28.
SJR 19
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REGISTERED SUPPORT / OPPOSITION :
Support
California Association of Realtors (Sponsor)
California Credit Union League (CCUL)
California Independent Bankers (CIB)
California Mortgage Bankers Association (CMBA)
Orange County Association of Realtors
Opposition
None on file.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081