About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
Filed under Government Mortgage Financing Programs News

Here is an excerpt of a recent Reuters report by Patrick Rucker. It explains the loan limit differences between the FHA reform bills going through the House and Senate:

Many of these troubled borrowers cannot benefit from the FHA program currently because their homes are valued higher than the current FHA loan limit of $362,000. The cap means FHA loans help very few borrowers in states like California that have high property values.

“Raising the loan limit can not only help current homeowners refinance into a fixed-rate loan but it could jump-start the housing industry in California,” said Dustin Hobbs, a spokesman for the California Mortgage Bankers Association.

The bill passed by the Senate would raise the current loan limit from $362,000 to at least $417,000, which is the same cap on loans that binds mortgage finance companies Fannie Mae and Freddie Mac. The House bill would lift it as high as $829,750 in some areas.

One question that could make a compromise difficult to reach is whether FHA should contribute to a new housing trust fund that would be established if provisions of the House bill hold. The Senate legislation has no such provision.

The FHA is a Depression-era program conceived in 1934 that was designed to insure the mortgage payments of low-income borrowers who might have trouble winning a loan.

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