BILL ANALYSIS Ó
SJR 19
Page 1
SENATE THIRD READING
SJR 19 (Correa)
As Amended June 25, 2014
Majority vote
SENATE VOTE :37-0
BANKING & FINANCE 12-0
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|Ayes:|Dickinson, Allen, |
| |Achadjian, Bonta, Chau, |
| |Gatto, Harkey, Linder, |
| |Perea, Rodriguez, Weber, |
| |Williams |
| | |
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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 United States credit
markets due to the subprime housing collapse, Congress passed
the Housing and Economic Recovery Act (HERA) of 2008, Public Law
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
SJR 19
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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 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.
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 about 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 President Obama'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 reform efforts. 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.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081
FN: 0004076