For the past 2 years, Freddie Mac's Super Conforming Mortgages and Fannie Mae's Temporary High-Balance Conforming loans provided higher maximum loan limits for high cost areas of the country ($793,750 in Honolulu County, versus the conforming maximum loan amount of $625,500). This was a temporary higher loan limit that is set to expire soon on September 30, 2011.

Right now, an Owner Occupant Rate on these "super conforming" loans are approximately 4.625%, 1.625 points according to Honolulu Home Loans, from whom I got an email this morning on this very topic.

It's unlikely that Congress would extend the temporary higher loan limits, so the impact on the real estate market in Hawaii could be substantial. However, in the past 2 years I've only seen 2 or 3 of those high balance loans, while most people seem to top out at $625k anyway, with cash for the rest.

Having worked in both the CA and Hawaii real estate markets, one thing that really stands out is that people in Hawaii are far more conservative, and often have very large down payments. In fact I think most people don't even consider the high balance loans, because they haven't even heard of them.

I don't think the government should extend higher loan limits, and actually it would probably be better if they got out of the finance business entirely. Fannie and Freddie caused the housing bubble via the "Community Reinvestment Act," as they forced lenders to give loans to people with poor credit and low income. Bad idea from the start.