We received an Update today form our Washington, DC contact informing us that the Bush Administration and House of Representatives have apparently come to an agreement, but there is still some uncertainty of what they have agreed to because the Bill is still being drafted. However, one point is pretty much certain, the FHA and GSE limits will be increasing in the near future.
- GSE limit will increase to $625,000 across the board throughout the country. It will be effective until December 31, 2008.
- The FHA limit will increase permanently along the lines below.
The Administration-House stimulus bill will include a provision raising the FHA limits to a 125% of median sales price with a maximum loan amount of about $729,000. This provision appears to be the House version of the FHA bill. It is believed that the House FHA bill (H.R. 1852) as drafted will also be included in the stimulus. If so the House version will raise the “floor” to 65% of the GSE limit. But our Washington contact stated that they will have to wait and see how the GSE language is written to determine whether the FHA floor will increase to 65% of the temporary limit (i.e. $625,000)
Impact on Current FHA Limits
For FHA, this change raises the current cap of 95% of median sales price to 125% and also raises the maximum from $362,790 to $725,000. For example, if 95% of the median sales price ($368,421) resulted in an FHA limit of $350,000 today, the new limit, if this provision is enacted, would be increased to approximately $460,500. Of course, in a market w/ a median sales price of $500,000 (1.25 times $500,000), the limit would increase to $625,000 and so on. Confusing, I know.
What is Next?
Our Washington contact believes that the legislation will likely be passed by the House very quickly (in the next week). It will then go to the Senate for consideration. But the House and Senate still have to work out the existing differences in the FHA bill including the mortgage limit issue. Of course, the Administration support of the FHA mortgage limit increase will be a positive force behind the negotiation process. In addition Barney Frank has removed the housing trust fund from the FHA bill eliminating a point of controversy. Outstanding issues in the FHA bills are the mortgage limits, mortgage broker approval requirements, risk-based pricing and seller funded downpayment assistance programs.
Our Washington contact also expects this bill to be “fast-tracked” and hopeful passed by February 15th.
Even though this is a little confusing I hope it helps a little bit. Stay tuned for more as I get more Updates.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
