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Key Vote Alert: Oppose Menendez-Isakson Elevated Housing Subsidies Amendment

October 20, 2011 J

Dear Senators,

On behalf of 1.8 million Americans for Prosperity activists in all 50 states, I strongly urge you to oppose the Menendez-Isakson amendment reinstating the high conforming loan limits for Fannie Mae, Freddie Mac, and the FHA. These limits determine the legal maximum for home loans that these entities can guarantee, one of the few checks on government’s expansive presence in the nation’s housing markets.

I urge you to vote NO on the Menendez-Isakson amendment that may come to a vote this week. Americans for Prosperity will rate this vote in our congressional ratings.

The best medicine for the ailing housing market is a gradual, predictable, and complete elimination of subsidies from Fannie Mae, Freddie Mac, and the FHA. While comprehensive reform may not be feasible in the current political climate, one way to wean the markets off of these government subsidies is to steadily reduce the conforming loan limit. The previous limit – up to $729,750 in certain “high cost” areas – fell as scheduled to $625,000 on October 1. This is still higher than the $417,000 limit prior to the housing crisis and significantly higher than the $221,800 median sale price of new homes in the U.S. in 2010.

Private issuers currently contribute little capital to the housing markets not because they don’t have the capacity, but rather because they are crowded out by the ultra-subsidized, government-owned GSEs and the taxpayer-backed FHA. They simply cannot compete with the funding advantages these entities enjoy. If the conforming loan limit is gradually reduced, the government’s dominance will cover ever-smaller segments of the market, and the healthy, privately-funded “jumbo” market for loans above the limit can expand to fill the void. Extending the elevated limits merely delays private capital formation and gives ground on an approach to winding down government housing support that even the White House has agreed is best.

The Menendez-Isakson amendment would further stall recovery by reinstating the elevated conforming loan limits for Fannie, Freddie, and the FHA, allowing the government to continue subsidizing loans for $700,000 homes. At a time when we need to dramatically shrink the size and scope of the federal government, there is no way to justify subsidizing homes of this value.

I urge you to vote NO on the Menendez-Isakson amendment. Americans for Prosperity will rate this vote in our congressional ratings.

Sincerely,

James Valvo
Director of Government Affairs
Americans for Prosperity

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