Readers suggest a topic on the conforming loan proposals. "How about the bundling of the Fannie Mae’s and Freddie Mac’s conforming loan amount raise? Isn’t it just going to delay the inevitable decline to reasonable prices by the year it’s supposed to be in place? I’ve been thinking 2010, maybe now 2011-2012 for jumping back in…"

One said, "Just because Fannie/Freddie can doesn’t mean they will take on those mortgages. They can’t be forced to, can they? Jeeze… one would hope their management has learned something from this whole mess."

Another, "After thinking about it, I’ve come to the conclusion that the conforming loan extension – while it won’t help many people – is needed in order to prices to get back to a reasonable level. This assumes that Fannie/Freddie won’t touch a toxic loan for this amount but insist on reasonable underwriting standards."

"I’m not dumb enough to believe that no one will default on one of these things, but if the underwriting standards require anything reasonable (PITI not exceeding 29 percent of take home, for example, along with fully documented income) the net effect should be to restore some order to the high end market, and as it comes down it will hasten the decline of the non-jumbo properties as well."

Another added, "Other than qualifying another generation of knifecatchers to bring liquidity to the moribund resale market and reprice the comps at the next leg down, I don’t see this raising of the GSE limit as having much effect on demand."

"Prices were driven through the roof in large part by making loans to unqualified buyers, and that in turn was only made possible by ignoring prudent lending practices like income verification. With 100+ subprime lenders gone for good, demand is far more dependent at this point on fundamental considerations like household income and credit history."

"NAR President Richard Gaylord, said that raising the loan limit on conventional financing is urgently needed."

"'The most effective way to stimulate housing and minimize the potential for a recession is for lawmakers to raise the limit on conforming mortgages to $625,000, which would open safe and affordable financing to buyers in high-cost areas,' he said."

"NAR projects the higher loan limit would increase annual home sales by nearly 350,000, reduce foreclosures by 140,000 to 210,000 and increase economic activity by $44 billion."

"'What's more, this would come at no cost to taxpayers -- it's a policy change that could really boost the economy,' Gaylord said."

The Tribune. "Local analysts say San Luis Obispo County residents with homes in the $600,000 to $900,000 range — and those looking to buy or refinance them—could see benefits. That bracket represents more than 500 houses now for sale in the county, said Matt Colonell, mortgage broker in San Luis Obispo."

"'Because the proposed change would make their houses more affordable to buyers, their houses might sell more quickly and for a higher price,' he said. '(It’s money) for real estate agents, title companies, mortgage lenders, home improvement contractors and hardware stores.'"

The Union Tribune. "'This would be absolutely, phenomenally excellent news for home buyers and sellers because it will help so many more people to qualify for loans that they can afford,' said Lori Staehling, president of the San Diego Association of Realtors."

"'We say hallelujah!' said Sherm Harmer, incoming president of the San Diego County Building Industry Association. 'We've been waiting for it for years.'"

"Jim Bliesner, director of the San Diego Reinvestment Task Force, said federally backed loans dried up in the county in recent years because prices outstripped the conforming cap."

"'Some people didn't have any choice but the subprime market – and they were getting steered away by mortgage lenders,' Bliesner said. 'I think it's a fine thing for them (to loosen the restrictions).'"

"Bob Tepedino at Century 21-Horizon said owners who bought at the peak of the real estate market and have lost equity will not be able to refinance into the new loans. He also said buyers hoping for easier credit terms will not be helped."

"'A lot of people are clutching at straws because the majority of people I know who are extraordinarily interested in refinancing don't have the equity or are upside down (owing more than the property is worth), in which case refinancing is probably not an option,' he said."

"'It's not going to help the lower rung of the market,' said Kelly Cunningham, economist at the San Diego Institute for Policy Research. 'And in San Diego's case, that's where the foreclosures and bankruptcies are taking place.'"

The LA Times. "'It's the single most effective step they could take to stabilize the housing and mortgage market,' said Rick Simon, a spokesman for Calabasas-based Countrywide Financial Corp., the nation's largest home lender, which had led the lobbying to raise the loan limits."

"Lobbying for an increase, the National Assn. of Realtors had estimated that increasing the conforming loan limit to $625,000 would strengthen current home prices by 2% to 3%."

"'This is a very positive development for California's lenders and homeowners,' said Susan DeMars, executive director of the California Mortgage Bankers Assn."

"Among those sounding skeptical notes was UCLA economist Edward E. Leamer, who said higher loan limits 'are not going to matter much now' because the housing markets are still destabilized by bubble-era home prices that must continue to fall."

"The proposed new conforming loan limit is far beyond the reach of most people, Leamer said. 'Most Americans can't afford a $700,000 house,' he added. 'They don't have the down payment; they don't have the income.'"

The Press Democrat. "(Some) are skeptical the changes will do anything more than help a small number of high-income buyers afford larger homes, doing little for the vast majority of homeowners struggling to hold onto their houses."

"'This is the stupidest plan ever,' said Chris Thornberg, founding partner with Beacon Economics. 'You're making it cheap for high-income people to borrow more money. Great!'"

"Thornberg, formerly with the UCLA Anderson Forecast, was one of the first economists to warn of a housing bubble in California and the consequences of a real estate slump. Despite the recent drop in home values, Thornberg said prices remain too high for most people to afford."

"Sonoma County prices have dropped 24 percent since peaking at $619,000 in August 2005. In December, the slowest month on record, the median home price was $466,500."

"Raising the lending limit won't help people refinance if they bought at the peak in 2005 and now owe more on their loans than their homes are worth, said John LeCave, owner of Fountain Grove Mortgage of Santa Rosa."

From Business Week. "Fannie and Freddie...still haven't fully rebounded from the big accounting scandals that first came to light in 2003. With substantially thinner profit margins and tighter regulatory constraints, they have limited financial freedom to bail out others' bad investments."

"'The real issue is that home prices are overvalued, and it gets uglier by the day. This might help on the margin, but it's not going to stop home prices from falling,' says mortgage analyst Paul Miller of Friedman, Billings, Ramsey (FBR). 'It's not going to solve the problem, but it's a way for [Democrats] to get something through that they've wanted for a very long time.'"

"'It is timely, it is targeted, and it is temporary. And it was done in record time,' House Speaker Nancy Pelosi (D-Calif.) said in announcing the deal on Jan. 24 with Treasury Secretary Henry Paulson."

"In the frenzy, the Administration surrendered its opposition to lifting the limits on Fannie and Freddie. 'I got run down by a bipartisan steamroller,' Paulson said in explaining the about-face. 'I was somewhat skeptical that, without this, we wouldn't get the reform. So now I've got to be an optimist.'"

"Loans from California alone accounted for nearly half of the market for jumbo securities during the first half of 2007. 'Of course, many of the jumbo loans are in places where house prices are falling, so there are collateral risks in those areas,' says Douglas Duncan, chief economist for the Mortgage Bankers Assn."

"OFHEO also will have a say. Director James Lockhart opposes raising their loan caps without additional oversight."

"'We just don't think it would be good to divert resources and manpower of these two firms from doing what they do best, which is supporting the conforming loan market,' Lockhart told BusinessWeek in a recent interview. 'They've never bought jumbo loans. They don't have pricing models, they don't have risk management models. So it would be a new world.'"

"Duncan estimates it will take Fannie and Freddie at least three to six months to assess the new risk and ramp up their systems to process jumbo mortgages. To offset that risk, Fannie and Freddie will have to charge higher fees for jumbo loans. So the interest rates won't be much better than today's pricing, according to Duncan and a separate analysis by OFHEO."

"The companies are also hamstrung by a regulatory order that keeps a tight leash on their operations, requires extra capital, and limits their growth."

"'While Freddie Mac will continue to do what it can to assist borrowers and help restore liquidity to the market, this additional responsibility would create a significant challenge for Freddie Mac as we continue to operate under severe capital constraints,' said Freddie Mac spokesperson Sharon McHale."