After weeks of pressure, the Federal Housing Administration blinked Wednesday and temporarily raised mortgage limits to a maximum of $729,750 for Santa Barbara and 13 other high-cost California counties.
Previously, FHA loan limits were capped at $362,790 in Santa Barbara County, where the median South Coast home price is $1.2 million. As a result, the Santa Barbara Association of Realtors and other real-estate industry organizations had mounted an intense lobbying campaign, calling on Sens. Barbara Boxer and Dianne Feinstein, both California Democrats, and Rep. Lois Capps, D-Santa Barbara, to raise the ceiling.
The increased mortgage limits, which apply to loans originated between July 1, 2007, and Dec. 31, 2008, also will extend to loans purchased or guaranteed by the government-sponsored Fannie Mae and Freddie Mac, the two biggest mortgage financers in the country.
The new limits — which take effect Thursday and will continue through the end of the year — are designed to let more homeowners with high-rate subprime mortgages refinance into more affordable, federally insured loans, FHA officials said.
Details for the rest of the country are to be announced this week. The idea is to stoke investor demand for securities made up of more expensive mortgages —so-called jumbo loans — backed by Fannie Mae and Freddie Mac. That would drive interest rates lower and spur home buying and refinancing.
Roughly half of all jumbo mortgages are in California, according to federal regulators.
The FHA’s action came as the government began providing aid to homeowners required by the recently enacted economic-stimulus package.
“This is good news for Santa Barbara County families who are working hard to earn a key piece of the American Dream — owning their own home,” Capps said in a statement Wednesday.
“Many families on the Central and South Coasts have been the unfortunate victims of despicable predatory lending programs and are now threatened with the devastating prospect of losing their home to foreclosure. These increased loan limits will help families keep their homes by obtaining more affordable government-insured loans.”
In addition to Santa Barbara, the counties at the maximum level for FHA loans are Ventura, Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Clara and Santa Cruz.