From Reuters:
Republicans and Democrats in the U.S. Congress have agreed on a measure that would increase the maximum size of mortgage loans that can be insured by the Federal Housing Administration, a key funding source for U.S. home loans.
The measure to raise the loan limits backed by the FHA still has to pass the Republican-led house and Democrat-controlled Senate before it becomes law, but the agreement by a bipartisan panel of lawmakers from both chambers indicates a strong likelihood of final approval.
The agreement reached among House and Senate leaders excludes those loans guaranteed by Fannie and Freddie, which provide about half of the funding of all U.S. residential home loans. The deal 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 agreement follows a polarizing debate over the size of mortgages the federal government should back. The measure to increase the legal limits on the size of mortgages the FHA can insure was included in a bill to fund a large swath of government programs, from food inspection to law enforcement, that is seen as must-pass legislation for many lawmakers.
The legislation containing the amendment extends funding on a temporary basis for many government programs through Dec. 16, giving Congress additional time to finalize funding levels. The House and the Senate must pass the bill by Nov. 18, when current funding expires.
Budget battles have raised the possibility of a government shutdown twice so far this year, as Republicans have pushed for steep spending cuts. Aides say they do not anticipate that this bill will lead to another round of budget brinkmanship.
The divisive debate on the loan limits will continue to play out this week as lawmakers push to pass the short-term funding measures. The Senate had pushed a measure that would raise the maximum size of a home loan backed by Fannie Mae, Freddie Mac and the FHA to $729,750.
The House did not include the higher limits in its bill to fund federal agencies through next September, instead favoring to keep the cap at $625,500.
So only the most overleveraged loans with 97% LTV should be guaranteed at higher levels? Benefiting mostly those who either should not be buying over $650k or benefiting speculators? Wow, that’s policy prowess.
Who knows how they came to this conclusion to raise FHA limits only, but it was probably due to not wanting to do anything for Fannie/Freddie.
Congress will get bashed for a day or two, but it will die down – it’s only more bailout money, and society has become numb to it.
What you don’t hear much about is that FHA at least charges the hjomebuyer a hefty mortgage-insurance premium, which should offset some losses, but FHA is already very thin and people are estimating an eventual need for a $50-$100 billion bailout.
While it’s no surprise that a governement with a FRB levered 51 to 1 would encourage it’s citizens to enter into voluntary servitude via massive debt, the wise would resist.
Just so you know, if you put down 20%, you can get an FHA loan without the mortgage insurance premium.
You still have to pay another (I think .25 point) premium, but it’s not a bad deal when you consider that jumbos are .4 to .5 higher than conforming.
If you’re going to buy anyway, who cares where the money comes from?
Chuck
If the jumbo upcharge is 1/2 a point with conforming mortgages at around 4.0% it seems this is much ado about very little. On a 700k mortgage we are talking about $3500 a year, gross difference and in the 2000s depending on ones income tax rate. And to think that folks make like its the end of the world if the limit is not raised. Its only an 11% increase after all. And since the limit increase is a subsidy by the center of the country to the coasts as well it really makes no sense.
The jumbo spread has incresaed substantially since 2008. I really don’t know why everyone wouldn’t be on board with this. Law and sausage, I suppose.
I am in the process of considering a refi and I was high balance conforming under the Fannie Freddie Limits but now I am over the new San Diego Fannie Freddie limit. Therefore, I would be in Jumbo territory. If the FHA higher limits pass, it sounds like I could refi under FHA?
How long do you guys think it would take for this to take effect if it passes? Thanks.
Can we get ahigher fha loan in Indiana(over 410,000.)