Members of U.S. Congress have reached an agreement on a measure that would increase the maximum size of mortgage loans that can be insured by the Federal Housing Administration (FHA). The measure would only impact FHA's loan limits, restoring the cap for mortgages the government insures to as high as $729,750 in high-cost real estate markets through 2013. The FHA's loan limits dropped at the end of September for mortgages insured by the FHA, as well as the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. The higher loan limit was temporarily raised for Fannie, Freddie and the FHA during the financial crisis and it automatically dropped back to $625,500 on Oct. 1.
"Legislation pending in the House and Senate will restore the higher mortgage loan limits for the Federal Housing Administration and is essential to help stabilize the nation's housing financial markets," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB). "The FHA program is fully self-supporting, and a great example of a public-private partnership with lending institutions. Restoring the loan limits will provide millions of potential consumers in markets throughout the nation access to safe, affordable mortgage financing."
The measure is part of the Fiscal Year 2012 Agriculture, Commerce/Justice/Science (CJS), and Transportation/Housing and Urban Development (THUD) Appropriations Bill, also known as the “Mini-bus” (House Report 112-284).
“Higher FHA loan limits are critical to supporting current housing prices and our overall economic recovery, and it doesn’t cost the federal government a dime,” said Rep. Brad Sherman (D-CA). “This is the single most important provision in the minibus bill to prevent a collapse of housing prices in high-cost areas like Los Angeles. I will continue to work with my colleagues to ensure that these loan extensions become permanent.”
In 2008, Reps. Brad Sherman and Gary Miller (R-CA) were successful in a bi-partisan effort to create a high-cost area conforming loan limit capped at $625,500 in high-cost areas that have median home prices above $417,000. Those limits were later temporarily increased to $729,750.
"To help mend the struggling housing market, stabilize home values, provide constancy while private investors re-enter the market and ensure that millions of creditworthy home borrowers can access the best possible mortgage rates, Congress must support this bill to help American families and get the lackluster economy moving forward," said Nielsen.
