Jim Woodward over at the Bend Weekly in Oregon recently gave this recap of the recent FHA reform developments:
FHA home mortgages – those insured by the Federal Housing Administration – may soon be a viable financing option for many more prospective borrowers. A current proposal, already passed by the House of Representatives, would raise the FHA loan limit to $417,000 in high-cost areas, reduce the minimum required down payment to 1.5 percent of the home’s purchase price, and extend the maximum amortization term to 40 years.
The new provisions are part of an FHA reform bill (H.R. 1852) working its way through Congress. The basic objective of the legislation, according to its text, is “to modernize and update the National Housing Act and enable the Federal Housing Administration to use risk-based pricing to more effectively reach undeserved borrowers, and for other purposes.”
It will give FHA the capability to be more effective in helping past borrowers of high-risk subprime mortgages. Some of those who are having difficulty in making their monthly payments, thus facing possible foreclosure proceedings, may have the opportunity to refinance into a friendlier FHA loan.
There has been pressure on legislators for years to bring FHA mortgage financing up to real-world economic conditions. Without these new and more flexible provisions, FHA would continue to be a dying breed of home financing options – or at least an endangered one.
An amendment attached to the bill would modify FHA loan limits to permit loans up to the lower of 125 percent of the local median home price, or 175 percent of the national conforming loan limit, with additional authority by the Department of Housing and Urban Development to raise limits by area by up to $100,000 if market conditions warrant.
