Congress has approved legislation extending for one year the existing loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration, allowing the loan guarantee and insurance programs to continue backing loans of up to $729,750 in markets with the highest cost of living.

"Extending the existing limits is essential to helping borrowers continue to have access to affordable long-term, fixed-rate mortgage credit in today’s struggling economy," the Mortgage Bankers Association said in welcoming the move.

"The current limits have been a key component of keeping the mortgage market functioning, helping keep mortgage interest rates low for consumers who want to purchase a home or refinance an existing mortgage."

In addition to extending the loan limits through Sept. 30, 2011, HR 3081 expands the FHA’s capacity to back multifamily loans, ensuring continued funding for development, renovation and mortgage refinancing to preserve affordable rental housing, the MBA said.

Congress instituted temporary increases in the $417,000 conforming loan limit in high-cost areas in 2008, allowing Fannie Mae and Freddie Mac to to buy or guarantee loans of up to 125 percent of the median home price in high-cost areas.

A sunset provision in that bill briefly brought the limit back down to 115 percent of median home price, with a cap of $625,500, on Jan. 1 2009.

The stimulus bill passed by Congress last year, H.R. 1, the American Recovery and Reinvestment Act, restored the higher limits and $729,750 cap through the end of 2010. The maximum in "normal" housing markets remains $417,000 for Fannie and Freddie and $271,050 for FHA.

HUD publishes FHA maximum mortgage loan limits at the county and metropolitan statistical area on its website. Loan limits for Fannie and Freddie are published by the Federal Housing Finance Agency.

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