In the fallout from the subprime mortgage crisis, even well-heeled consumers are finding it tougher and more expensive to get jumbo mortgages of more than $417,000. That’s because investor interest in these larger loans, which aren’t backed by Fannie Mae and Freddie Mac, has dried up amid the turmoil in mortgage markets. In turn, the jumbo loan crunch could potentially dampen pricey real estate markets like the Bay Area, where two-thirds of mortgages are jumbo.

But Congress can help ease the jumbo mortgage squeeze. It should lift an unreasonable cap on the size of mortgages that can be purchased by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), two federally chartered institutions that buy home loans and package and resell them to investors. The two companies currently can purchase only “conforming” loans below $417,000.

Letting them buy bigger mortgages would extend the benefits of federal backing to a wide swath of home buyers and owners throughout the country. Allowing the two institutions to play a broader role also could help restore some confidence in mortgage markets and stabilize the overall real estate market.

The House of Representatives in May passed a broad housing finance bill with a measure that would allow the government to designate certain metropolitan areas as high cost. The provision would enable Fannie Mae and Freddie Mac to buy mortgages from these expensive areas as large as 150 percent of the conforming loan limit - which works out to $625,500 based on the existing conforming loan limit. This provision deserves passage.

It makes little sense to have a single loan limit, set yearly by the federal government, apply to most of the country. Currently, only Alaska, Hawaii, Guam and the Virgin Islands are considered high cost areas with a higher cap.

Traditionally, jumbos have carried interest rates one-eighth to three-eighths of a percentage point higher than conforming loans because investors see the larger loans as riskier. But that difference has increased to almost a full percentage point now after rates on jumbos soared this summer as investor skittishness toward the larger mortgages intensified. (The nationwide average on a 30-year, fixed-rate jumbo loan is 7.4 percent, vs. 6.5 percent on a conforming loan, according to HSH Associates.)