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FHA Retooled to Meet Nation's Housing Needs
Legislation approved today by Congress will modernize the Federal Housing Administration to enable it to be more effective in helping to meet the nation’s housing needs.
“H.R. 3221 will give the FHA greater flexibility to respond to the needs of borrowers, enable more working families to become home owners, expand affordable mortgage loan opportunities for seniors and allow the agency to play an important role in stabilizing the mortgage markets,” said NAHB President Sandy Dunn.
Over the past two decades, the popularity and relevance of FHA’s single-family programs has waned because statutory and regulatory constraints have limited the agency’s ability to carry out its mission to spur housing opportunities for America’s working families.
The differences between FHA’s requirements and those for conventional mortgages have been viewed by lenders, appraisers and others as a disincentive to use FHA programs.
FHA’s program and operational requirements, which are established by Congress, have seriously limited its ability to deliver the range of mortgage products that are needed to fulfill its housing mission.
H.R. 3221, the Housing and Economic Recovery Act of 2008, contains several provisions that will allow the FHA to deliver a range of mortgage products more effectively. However, the FHA's minimum downpayment has been increased from 3% to 3.5%. The bill:
- Increases the current limit for FHA-insured mortgages to enable deserving potential buyers to purchase homes in more markets across the country. “Permanently raising the FHA loan limit to 115% of an area’s median home price, up to $625,500, will enable more creditworthy borrowers to purchase an FHA-insured home in high-cost markets,” said Dunn.
- Also increases the floor for area FHA limits from $200,160 to $271,050.
- Enables the FHA to simplify requirements for condominium loans, which have often been burdensome and have differed significantly from the rules applied to mortgage loans for detached single-family homes.
- Expands opportunities for seniors to tap into equity in their home through FHA reverse mortgage loans. The bill creates a higher, nationwide uniform loan limit equal to $625,500, reduces and caps the maximum fee lenders can charge seniors for FHA reverse mortgage loans and establishes protections to prohibit requiring seniors to purchase other financial products in conjunction with these loans. This will help more seniors who are at least 62 years old access the equity in their homes without having to make mortgage payments until they move out.
- Permits the FHA to extend the maximum loan maturity to 40 years to enable borrowers to reduce their monthly mortgage payments while ensuring that some part of the monthly payment is used to reduce the outstanding loan balance.
- Allows the FHA to charge higher mortgage insurance premiums, but places a one-year moratorium on implementation of risk-based mortgage insurance premiums.
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