Rep. Scott Garrett (R-N.J.) is a staunch opponent of raising the size of home loans that the federal government can insure, saying it would only help purchases of the most expensive homes.
A polarizing debate over the size of mortgages the federal government can insure could complicate passage of the minibus legislation and the attached continuing resolution later this week.
The minibus conference report increases the size of mortgages the Federal Housing Administration can insure, but not the size of mortgages Fannie Mae and Freddie Mac can insure, GOP sources confirmed today.
Raising the stakes is a pending inspector general report on the FHA that Republican Members and aides say will paint a bleak picture of the agency.
The report, said to be released today, will show that the FHA is “totally undercapitalized,” said Rep. Scott Garrett (R-N.J.), an opponent of raising the limits. Another Member and a GOP aide confirmed that a damaging IG report would be released today.
Calls and emails to officials at the Department of Housing and Urban Development, which houses FHA, and that agency’s Office of Inspector General were not immediately returned.
At issue are legal limits on the size of mortgages federal agencies can insure, also called conforming loan limits. The Senate-passed minibus raised the limits, but House-passed spending bills have not.
Proponents of raising the limit say it will bolster the housing market and help revive the economy. Opponents say it would be a subsidy for millionaires to buy expensive vacation homes.
Rep. John Campbell (R-Calif.) has made a crusade of raising the limit, telling Roll Call that housing prices will “crater, and it’ll be our fault” if it’s not done.
Campbell voted “no” on a stopgap spending bill that went down on the House floor in September, gaining an audience with Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) on the issue in doing so.
Garrett opposes the measure just as fiercely.
“We are not talking about first-time homebuyers here,” he said. “If you’re talking about a $700,000 loan, you’re talking about buying a $1 million house. This is just a case of saying, ‘Should the average American be supporting, basically, millionaires?’”
Now that the limits have been raised in the conference report for the FHA, GOP sources warn that a bitter fight is ahead this week as Boehner looks to pass the bill.
Raising the limits is “tremendously divisive,” a senior GOP aide said. “There will be Members who vote ‘no’ solely because of this issue. I find it hard to think of a dumber strategy — let’s increase the exposure of the federal agency that is going bankrupt and that provides absolutely no political benefit to any Republican constituency whatsoever.”