Central Maine Blog

What's At Stake?  FHA Reform and Increased GSE Limits

Talking Points FHA Reform S. 2338

  • FHA loans are limited in many areas of the country by mortgage limits that are too low
  • Low FHA loan limits helped steer many borrowers into “specialty” mortgages contributing to the foreclosure and mortgage crisis we face today.
  • S. 2338 will reduce the required 3 percent minimum downpayment to 1.5 percent, and provide FHA with the flexibility to offer varying downpayment terms to different types of borrowers.
  • S. 2338 will also increase the FHA high cost loan limit from $362,790 to the 2007 conforming loan limit of $417,000.
  • In non-high cost areas, the FHA limit would increase from $200,160 to $271,050 for single unit homes.

Talking Points Freddie Mac/Fannie Mae (GSE) Loan Limits

  • Freddie Mac/Fannie Mae conforming loans are not readily available to homebuyers in the nation’s high cost metropolitan markets.
  • The 2007 Freddie Mac/Fannie Mae loan limit cap of $417,000 is well above the national median sales price of $220,800 for single family homes and exceeds the local median in most housing markets, BUT it is consistently well below the local median in high cost areas.
  • Increasing the Freddie Mac/Fannie Mae loan limits will also help inject more mortgage money into the market.
  • Increasing the loan limits will help boost the national homeownership rate.


NAR Policy

NAR supports legislation to modernize the FHA single-family mortgage insurance program and make FHA loans an available financing option once again. Had FHA loans been a viable product in the recent past, many families would not have fallen prey to the risky sub-prime mortgages causing record numbers of defaults and foreclosures. The specific reforms proposed include: increased FHA mortgage limits nationwide and in high cost areas and lower FHA downpayment requirements.

NAR also supports efforts to increase the Fannie Mae and Freddie Mac (GSE) loan limits to make homebuying more affordable in the nation’s highest cost areas. Allowing regional adjustments to the conforming loan limits is a matter of simple equity for the families residing in high cost metropolitan areas.

Status in Congress for FHA

S. 2338 the “Building American Homeownership Act of 2007” is pending on the Senate Floor. The House has already passed an FHA reform bill, H.R. 1852.

Status in Congress for Freddie Mac/Fannie Mae (GSE) Loan Limits

H.R. 1427 (GSE Reform) and S. 2036 both include provisions to increase the conforming loan limits in high cost areas, but have yet to be considered by the Senate Banking Committee. Increased loan limit provisions included in H.R. 1427 (GSE Reform) have already been approved by the House.

Posted by Rachel Anderson on November 29th, 2007 6:25 PMPost a Comment (0)
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