Put 'jumbo' mortgages on a diet - Kansas City Star

The following editorial appeared in the Kansas City Star on Tuesday, Sept. 27:

This Saturday, the size of a "jumbo" mortgage - the maximum amount that government-affiliated entities will back with tax money - will shrink from $729,750 to $625,500.

While that's good news, industry supporters haven't given up on their effort to get Congress to restore the higher cap.

A jumbo mortgage is a loan that's normally too big for Fannie Mae and Freddie Mac to buy and guarantee. But during the financial crisis, Congress raised the limit on what Fannie and Freddie could buy to keep high-cost coastal markets from imploding.

The increase was supposed to be temporary, but it was extended once. It should not be extended again. With almost all new mortgages currently backed by taxpayer guarantees, it's time to dial back taxpayers' involvement.

Dropping the jumbo-loan cap will allow private sources of capital to move into that market, reducing the potential liability of taxpayers.

Buyers may complain about higher interest rates or bigger down payment requirements. But subsidizing the purchase of mansions by the affluent makes no sense - especially after the Treasury has coughed up $141 billion so far to bail out Fannie and Freddie.

28 Sep, 2011

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