GSE Loan Limits Extended for Another Year. FHA Appropriated $20 Billion

by devteam October 1st, 2010 | Share

H.R. 3081: Making Continuing Appropriations for Fiscal Year 2011, and For Other Purposes, passed the House of Representatives this morning. Buried in that legislation wasrnauthorization to extend current loan limits for mortgages provided throughrnFannie Mae, Freddie Mac, and the Federal Housing Administration.  </p

Passage of the legislation willrnensure that current loan limits for single-family residential mortgages willrnremain in place until September 30, 2011 at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas.  Outside of those high-cost areas, the ceiling for FHA is $271,050 and the ceiling for Fannie Mae and Freddie Mac’s conforming loan limits is $417,000.</p

The bill also appropriates $20rnbillion so that FHA can continue making loan commitments through the end ofrn2010 from its General and Special Risk Insurance Funds.</p

The higher loan limits have beenrncontroversial in some corners with critics speculating they could fuel anotherrnhousing bubble.  However, with privaternfunding virtually non-existent,  home sales in higher cost areas would be badly hurt and the housingrnrecovery slowed if enterprise sponsored mortgages or FHA guarantees were not availablernas a substitute for jumbo mortgages.</p

Immediately after House passagernof the bill the Mortgage Bankers Association (MBA) commented on the action.   In a press release the organization said thatrnboth extension of the limits and the additional funding were extremelyrnimportant given the fragile nature of the housing market.  “Extending the existing limits isrnessential to helping borrowers continue to have access to affordable long-term,rnfixed-rate mortgage credit in today’s struggling economy, the release said. rn”The current limits have been a key component of keeping the mortgagernmarket functioning, helping keep mortgage interest ratesrnlow for consumers who want to purchase a home or refinance an existingrnmortgage.</p

 “Likewise,rnproviding the FHA with additional multifamily commitment authority will helprnensure funding for the continued development, renovation and mortgagernrefinancing necessary to preserve affordable rental housing in thisrncountry.  This sector has been crucial during the recent housing downturnrnand credit crisis, and FHA needs the additional authority in order to ensurernthe market remains liquid.”    </p

President Obama is expected to sign the legislation into law before midnight tonight.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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