Further evidence for the blame-the-not-too-rich thesis, from Daniel Indiviglio:
For a quick refresher, the government agreed to back bigger mortgages in 2008 when the credit markets froze up. At that time through September of this year, the mortgage limit was 125% of the metro area’s median home price in 2007 or $729,750, whichever was smaller. Prior to this jump, the limit was set at just $417,000. As of this month, that limit declined to 115% of the metro area’s median home price in 2010 or $625,500, whichever is smaller.
You can see that this policy is specifically geared towards relatively expensive mortgages. It isn’t meant to lend a helping hand to Americans on the cusp of home ownership. It isn’t even meant to assist the average homeowner, who will have an income above the metro area’s average. In any city, those who raising the limit would benefit will be relatively affluent. The old limits should be allowed to expire.
As I wrote a few weeks ago, the expiration of the limit came and went, but the change didn’t disrupt the housing market. Experts said that it wouldn’t have a big impact: banks would continue to finance these jumbo mortgages without government support. They might just be a little more expensive. Of course, if you’re getting a mortgage for $700,000, then you can probably afford a couple more basis points on your mortgage interest rate.
But today, the Senate passed an amendment to a minibus spending bill that would extend the old, higher mortgage limits. It passed 60 to 38. Just eight Republicans voted in favor, while no Democrats voted against it. [Emphasis added]
The fact that Republicans in the Senate proved more resistant than Democrats is encouraging, but it presumably reflects the fact that the relevant not-too-rich constituency, i.e., two-earner HENRY households (High-Earners, Not Yet Rich), live in high-cost, high-tax jurisdictions. These households vote in disproportionately large numbers, and they dominate the ranks of Democratic small donors.