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FOR IMMEDIATE RELEASE
June 20, 2008

Gov. Blagojevich calls on federal housing agency to provide fair treatment for Chicago area homebuyers
Letter sent to HUD Secretary urges expanded financing options for homebuyers in the Chicago area

CHICAGO – In an effort to keep mortgage financing options available for Chicago area homebuyers, Gov. Rod R. Blagojevich urged the U.S. Department of Housing and Urban Development (HUD) to raise the cap on loans considered to be conventional mortgages.  In a letter sent to Secretary Steve Preston, the Governor requested the Administration increase the dollar value of loans eligible to be considered conventional mortgages above their current threshold.  The higher value mortgages could be purchased by Fannie Mae and Freddie Mac, giving homebuyers in the Chicago metropolitan area the same options that are now available in other high-cost housing markets around the country. 
 
“We want to make sure that when a family finds a place they want to call home, they can find a mortgage that is affordable.  However, in many communities, the high cost of housing makes financing a house difficult for working families,” wrote Gov. Blagojevich.  “In these communities, increased flexibility from the FHA, Fannie Mae and Freddie Mac, would go a long way towards spurring the lagging housing market.”
 
As part of the 2008 Economic Recovery Act, limits on conventional mortgages were raised to spur home sales in communities across the country.  In his letter, Gov. Blagojevich urged HUD to add Chicago to the list of more than 100 communities with new limits.  Increasing the cap on conventional mortgages would expand the options for families seeking to purchase a home throughout Chicago and its suburbs.  The increased cap would prevent families from having to seek ‘jumbo’ mortgages above the FHA re-sale limit, which are more difficult to qualify for and usually have higher interest rates. 
 
“While HUD recently increased these limits for 100 communities around the country, the agency failed to include the Chicago metropolitan area in the revised grouping. While Cook, DuPage, and Lake Counties may have some of the most affordable metro area housing in the country, these same communities also have housing that is among the nation’s most expensive. Given this reality, it only follows that these communities need loan products that reflect the diversity of their housing stock.  Accordingly, I urge HUD to increase the loan limits for the Chicago metro area,” wrote Gov. Blagojevich.
 
 
The full text of the Governor’s letter is below:
 
Dear Secretary Preston:
I am writing to request that the Department of Housing and Urban Development’s Federal Housing Administration increase the dollar value of loans eligible for purchase by Fannie Mae and Freddie Mac in parts of the Chicago metropolitan area.  While HUD recently increased these limits for 100 communities around the country, the agency failed to include the Chicago metropolitan area in the revised grouping.
We want to make sure that when a family finds a place they want to call home, they can find a mortgage that is affordable.  However, in many communities, the high cost of housing makes financing a house difficult for working families.  In these communities, increased flexibility from the FHA, Fannie Mae and Freddie Mac, would go a long way towards spurring the lagging housing market.
The methodology used by HUD to distinguish which communities should have higher loan values failed to accommodate the market realities in areas like Northeast Illinois.  While Cook, DuPage, and Lake Counties may have some of the most affordable metro area housing in the country, these same communities also have housing that is among the nation’s most expensive. Given this reality, it only follows that these communities need loan products that reflect the diversity of their housing stock.  This can only happen if the FHA increases loan limits for these areas which will ensure more flexibility in the range of loan products offered.  
According to the Illinois Association of Realtors, the median price of a single family home in DuPage County in 2007 was $350,000.  Applying the same multiplier (125%) used by HUD to designate which areas should have higher loan limits to home prices in this community produces a value of $437,500, well above the $417,000 limit to meet the jumbo loan cap.
According to sales data for the second quarter of 2008 obtained via www.trulia.com, there are more than 41 zip-code based submarkets in the Chicago area that, based on the HUD methodology, would be eligible for higher value loan products:
·        Cook County- 31 zip codes
·        Lake County- 9 zip codes
·        DuPage County- 7 zip codes
Compare these figures with another of the largest metropolitan areas in the country, the 3 counties that make up Miami-Fort Lauderdale.  These counties secured the maximum loan limit cap of $729,750 and yet only 37 of this area’s 245 zip codes (15%) would qualify (13 Broward zip codes, 19 in Miami-Dade, 5 in Palm Beach).  
Accordingly, I urge HUD to increase the loan limits for the Chicago metro area.
 
Sincerely,
 
 
Rod R. Blagojevich
Governor


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