Getting a Mortgage May Cost More

Newsday
By James Bernstein

February 16, 2011
Getting a mortgage on Long Island would be more costly than ever if an Obama administration proposal aimed at reducing the role of mortgage giants Fannie Mae and Freddie Mac is eventually adopted by Congress, real estate executives said.

The administration late last week said it would support allowing Fannie and Freddie loan limits to expire in October. The limits were raised to a maximum of $729,750 in 2008 to make sure home loans were available to buyers. If the administration's proposal goes through, maximum loan limits would fall to about $625,500. Mortgages above the maximum would be costlier because Fannie- and Freddie-backed loans typically cost less than loans acquired elsewhere.

So the timing for Sen. Charles Schumer to show up early Monday morning at a meeting in Melville of the Commercial and Industrial Brokers Society of Long Island could not have been better. The New York Democrat said straight out that he does not like the administration's proposal and would fight it "tooth and nail" in Congress this year.

If the administration's proposal is adopted, loans will be much more expensive, and harder to get, particularly above the $600,000 level.

The proposal is among several the administration announced in a "white paper" last week, all aimed at shrinking the government's broad support of the nation's crippled mortgage market and possibly eventually phasing out Fannie and Freddie, which the government took over in 2008 and which have racked up $134 billion in taxpayer losses.

David Pennetta, the new president of the brokers' society, said Long Island would be disproportionately hurt by the administration's plan.