House, Senate Pass FHA Reform Bills But Differences Hold Up Final Version-

House, Senate Pass FHA Reform Bills But Differences Hold Up Final Version-

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The FHA modernization bill that will increase loan limits and lower down payment requirements on FHA loans remain on hold until Congress return later this January. However the final version of the bill may take a bit longer. The delay is in part to two major differences between the House and Senate versions. Their major differences reside on loan limits, broker net-worth requirements and Down Payment assistance programs.

Concerns by the senate fell with the Houses’ approval of risked-based pricing structure, which Mortgage Insurers strongly oppose. The Senate agreed to place a one-year moratorium on the FHA implementing risk-based premiums.  The House is expected to accept the Senates moratorium on RBP’s and agreeing on a minimum down payment between 1.5% and zero due to the importance of FHA reform to help stimulate the lagging housing market.

The House-passed bill raises the maximum FHA loan limit to $730,000 or 175% of the Conforming Loan Limit. Loan limits at this level should provide assistance in the high-cost Bay Area Housing market by providing an influx of purchase money in an otherwise constricted loan market.

FHA officials expect for FHA applications in 2008 to double. FHA in 2007 held a 6% share in the market compared to Fannie and Freddie which held 60% of mortgage activity. FHA market share in 2008 is expected to reach 20% with the modernization and increased loan limits.

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