The FHA’s conforming loan limits — the largest mortgages the government is willing to back — are set to drop on October 1. That would mean, realistically, that prospective buyers of millions of homes across the country would no longer be able to get reasonable financing.

Naturally we’ve been pushing to extend the higher limits past September; the last thing this market needs is another road block (or even a speed bump).

imageWe’ve gotten some Congressional support from Reps. Gary Ackerman (D-N.Y.) and John Campbell (R-Calif.), who introduced a bill to extend the current conforming loan limit  for another two years.

Their bill is HR 2508, the Conforming Loan Limits Extension Act, and it would allow Fannie, Freddie, and the FHA to buy or back mortgages worth as much as $729,750. (Without it, the loan limit will drop to a maximum of $625,500 — lower in some counties, and when the National Association of Home Builders did the math, it found that something like 17 million homes would instantly be out of range of federal backing.) Click here to see how the reduced limits will affect Virginia cities and counties.

The idea, of course, is to wean the nation from such wide government support — more than 90% of mortgages these days are backed or owned by one of those “F”s. But we’ve all seen how finicky private capital can be, especially when things get rough.

As Rep. Ackerman put it, “The housing market does not need to a self-inflicted wound. With the economy remaining fragile and the housing sector still struggling to recover, now is not the time to make the cost of mortgages more expensive.”